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Esam Stockton
Esam Stockton

Buy Or Build First Home

And thanks to inflation and supply chain problems, builders are also paying more for building materials and things they need to build houses, like workers and fuel. All that to say, building a house is not cheaper than buying!

buy or build first home

And be careful! All those little details and decisions caused Jayson, a member of our Ramsey Baby Steps Community on Facebook, to get caught up in the excitement of building a new home and spend more money.

Want to see what home prices fit your budget? Try our free mortgage calculator. And for a mortgage you can pay off fast, talk to our RamseyTrusted friends at Churchill Mortgage about getting a 15-year fixed-rate conventional loan. (We only recommend these loans because any other type of mortgage will drown you in interest and fees and keep you in debt for decades.)

If you want a real estate agent who will do whatever it takes to help you find the perfect home or lot to build on, try our RamseyTrusted agents. They are top performers who share our mission to help you crush your financial goals.

Of concern was a 7.2% decrease in the number of sales of existing homes, which speaks to the low inventory of available homes. Expect still higher prices with a lower number of sales until the market works itself back into a balance.

Building an affordable home may be the only way to realize your dreams for custom features and unique satisfaction. While you should expect a more expensive process that will require more energy and effort on your part, you can typically expect a higher return on your investment when you sell.

Buying a home can help you move forward quickly, which can come in handy if you are pressed for time. Although you may have to compromise on the perfect floor plan, buying an existing home is usually less time-consuming and less stressful.

First-time homebuyers are often eligible for specific programs and discounts that can make buying a home more affordable. For example, an FHA loan, which is backed by the Federal Housing Administration, is designed to help first-time buyers. It requires as little as a 3.5% down payment, for example. And while most mortgages require a credit score of at least 620, you can secure an FHA loan with a credit score of 580. If your credit score is slightly lower, say between 500 and 579, you could still qualify for an FHA loan, but the down payment requirement jumps up to 10%.

Knowing all of the types of mortgages available can help you find the best home loan program for your financial situation. While the most common type of home loan is a conventional 30-year fixed mortgage, which refers to a traditional private loan from a bank, the right loan type for you will vary depending on your specific situation.

This is the part where you get to scroll through Zillow -- and not just window shop. Looking for a home online has become something of a national pastime, but you should also go to local open houses, as well as talk to realtors, brokers and other people in your neighborhood who have recently purchased their first home.

You want to put your strongest foot forward when making an offer as a first-time homebuyer. Making your highest and best offer first is usually what realtors recommend in order for it to be competitive, which is particularly important right now.

Your closing costs will add up to thousands of dollars. The average closing costs for a single-family home purchase were $6,387 in the first half of 2021, but they vary widely depending on where you live. For example, in high-demand places such as New York, average closing costs can be as high as $17,000. Typically, your closing costs will be around 2% to 5% of your loan.

The median cost of new construction was $449,000 in May 2022. Comparatively, the median cost to buy an existing home was $414,200, according to the most recent data available from the National Association of Home Builders (NAHB) and the U.S. Census Bureau.

However, the data reveals a significant drop in costs for those who already have a lot on which to build. A separate study from the NAHB, dating back to 2019, ballparks the purchase price for a plot to be 18.5% of the total costs for new construction. This bumps down the cost of building a home to an estimated $365,935 for those who already own a lot.

An alternative is to get a construction-to-permanent loan. With one of these, you borrow using a single loan to buy the land and build the home. Money is released as you reach preset construction milestones.

For example, buy a home in Ilion, New York, and you can expect housing costs that are roughly 800% less than the statewide average. But purchase one in Chelsea, NYC, and you can expect to pay dearly. The median sale price there in April 2022 was an astronomical $2 million, according to

For example, if you wanted to buy in Arizona, Florida, or Tennessee, CoreLogic says prices in all three states rocketed by more than 27% over those 12 months. That might influence your decision over whether to build or buy your home.

This article was written as global forces such as supply-chain issues and inflation were pushing construction costs sky-high, when making predictions was even more difficult than usual. But here are some factors that might swing your take on whether it is better to build or buy a house in 2023 and beyond:

The good news for such buyers is that many expect home price increases to slow dramatically in 2022. So while home values should keep rising, if the experts are right, the worst of skyrocketing prices could be behind us.

If you know a local real estate agent and contractor, you may be able to model the cost of building for both a theoretical purchase and construction project, then compare them to see which is more affordable.

If you buy an existing home: According to the latest figures, the median cost of buying an existing single-family house is $334,500. For the average 1,500-square-foot home built before the 1960s, that comes to about $223 per square foot. That said, the exact price can vary widely based on where you live. (Go to to see the price per square foot in your area.)

Last but not least, by building your own house, you get to design it to your exact specifications. If you have very clear ideas about how you want your home to look, this blank slate could be worth every penny.

If you build your own home: Recent construction almost always beats older homes in energy efficiency, says Kyle Alfriend of the Alfriend Real Estate Group Re/Max in Ohio. Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into reduced energy expense every month, even with the higher square footage in many newer homes.

There is a lot to be said for a new house. They appreciate faster than an existing house, for example. However, they generally cost more per square foot to build or buy than existing housing. Everything in a new house has never been used, making you the first to use them. This also means those amenities might not be as trustworthy as those that have stood the test of time.

The decision to build or buy involves much more than rounded corners or custom kitchens. This might be hard for a first-time homebuyer who wants their first home to be perfect. However, the old adage in real estate says the three most important things to consider are location, location and location. is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.

Building a home rather than buying one allows you to customize it to your needs, among other advantages. However, construction timelines have lengthened due to material and labor shortages, and this trend is being reflected in price tags. The average price of a new-construction home in November 2022 was $543,600, up from $496,900 in January 2022, according to the U.S. Census Bureau.

The costs of building a home include labor, supplies, permits, architectural drawings and inspections. You can cut down on expenses if you do a lot of the work yourself and select cheaper materials. Overall, the cost of building a home is largely contingent on how much you choose to spend on each component of the project.

Shopping for a competitive mortgage is key to lowering the costs associated with buying a home. Negotiating fees with the lender, purchasing points to lower your interest rate, and applying for down payment or closing-cost assistance can all be a part of your saving strategy.

Mortgages you (or your spouse if married filing a joint return) took out after October 13, 1987, and prior to December 16, 2017 (see binding contract exception below), to buy, build, or substantially improve your home (called home acquisition debt), but only if throughout 2022 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

Exception. A taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, is considered to have incurred the home acquisition debt prior to December 16, 2017.

Mortgages you (or your spouse if married filing a joint return) took out after December 15, 2017, to buy, build, or substantially improve your home (called home acquisition debt), but only if throughout 2022 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately). 041b061a72


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