Making the decision to build a home rather than to purchase depends mostly on how much you are willing and able to spend to build or buy your new home. It is natural to dream of building a new home. There are upsides and downsides to each. Here we will cover the pros and cons of each.
Research the Local Real Estate Market
The first thing to be done is to gain a greater understanding of what the market in your chosen area is like. With your budget in mind, search for the type of home you can purchase for that amount. What is the square footage and acreage that you can buy with your proposed budget?
Seek the assistance of a local real estate agent. For example, if you are in Arizona, find a realtor that specializes in Phoenix real estate to explain in detail what type of home you can expect for your expected budget. The realtor should also be able to connect you with a mortgage specialist that can tell you the amount you are pre-approved for. This will help you determine how realistic your budget plan is.
Consider the Lot Purchase
Before construction could begin, you must first purchase the land you will build your house upon. This will also be a job that your realtor can help you with. You will need to subtract the amount of the lot from the building budget.
Inquire about a Construction Loan
Since you are likely not an expert on new construction, you will need to familiarize yourself with both the construction loan process and the general contracting process. Your realtor should be able to direct you to lenders that can supply a pre-approval for a construction loan.
Construction loans are divided into segments called draws. Draws are portions of your mortgage divided into pieces related to the part of the job that you are scheduled to work on. Once that portion is done, you will be given another draw to complete the next stage of the construction.
Find a General Contractor
A general contractor (GC) is a builder that is qualified to spearhead your construction project. A GC is responsible for coordinating the construction crew and subcontractors (i.e., brick masons, plumbers, and electricians).
A GC will give you an estimate of how much home you can afford for your budget. They will also give you an idea of how long the process should take. You should also inquire about the invisible costs related to the construction. There are likely many things that you have not yet considered.
The choice of whether to build or buy is ultimately up to you. You must take all of the things mentioned here and determine whether you are up for the project or if it is better to find a home that meets your budget and taste. If you have the patience to wait for your new home to be constructed and have the budget to complete the project, the new construction may be right up your alley.