Building a Home vs. Buying a Home
Updated October 5, 2021 . AmFam Team
When you’re ready to purchase your very own home there’s always the home buying vs. building conundrum. There are pros and cons to both options. Of course, the decision is all yours and you’ll be basing it on your unique lifestyle. But let’s look at a few of the reasons you might want to build or buy a home.
Table of Contents:
Financing a New Build vs. an Existing Home
Build or Buy, American Family Insurance Has a Homeowners Policy for You
The Pros of Building a Home
“That sounds too expensive,” or “I don’t know if I can wait that long.” These are common answers to that inner dialogue home shoppers have to the question: “should I build a house?”
When you decide if you are going to build a house from scratch, it can be both very exciting and a bit scary. We’ve compiled this list of pros and cons for building or buying your next home to help you with that tough decision. Here are some of the main reasons why you should build your own house.
It’s brand new
When you build a new home, everything is just that — new! So, the odds of you needing to make any repairs within the first few years are slim to none. This gives you a longer time to settle in and enjoy your home without having to worry about making repairs.
Customize your home
It’s not always easy to find exactly what you want in an existing house. If you choose to build a house, you’ll have total control over the design of your home. You get to customize the floorplan in a way that makes sense to you and your family.
Avoid the bidding war
When the market is hot, homes can sell quickly, making the home-buying competition fierce. Depending on your area, finding a home that has the features you want can be very difficult and frustrating. And then, when you do find it, you might end up on the losing side of a bidding war. But when you build a home, you never have to worry about outbidding other buyers or the stress that comes from home shopping.
Really move-in ready
Even the most move-in ready house may still have a couple things you want to change, even if it’s just the color of the walls. But when you build a home, it’s exactly how you want it, from the flooring to the cupboard hardware. This means you can sit back and start enjoying your home from day one.
Build with better technology
Smart homes are becoming more and more common as people get used to the convenience and added safety it can provide. Even if the home you build isn’t packed with tech from the get-go, it is often tech ready. This means everything from security measures to electric gadgets — your new home could be a smart home in no time! In addition to all the benefits you get from having a smart home, you may also earn a discount on your homeowners insurance, just for being a trendsetting techie.
New homes are energy efficient
When you care about being energy efficient, you can make a big difference by building your home. You get to focus on bringing top of the line technology and energy savings into your home. And you get to do so in a customized way that focuses on what means the most to you.
Build a house that’s on top of the trends
One of the reasons to build a house is that new homes come with modern trends and cutting-edge style. Forget about renovating that outdated bathroom, when you build your own home you get to pick the style you want, down to the smallest details. Your home is magazine-glamorous from day one.
Current on codes
Building codes do change over time, always with an eye on protecting the residents, the neighborhood or the environment. Quite often the changes incorporate new and safer technology. With a newly built home you know you’re up to code and nothing has been grandfathered in.
Cost efficient
While it typically costs more in the beginning to build a home, you may recoup those expenses quickly and see a bigger payoff in the long run. When you build a house, there are no costly repairs for appliances, updates or remodeling. Most homes are built in newer neighborhoods that are very desirable. Add to that the annual savings you’ll realize with newer, more efficient appliances and construction techniques, and you’ve got some real financial benefits.
The feeling
Don’t forget the emotional aspect of building your own home. There’s nothing quite like knowing that it’s all yours and no one has lived there before. You get to start fresh and feel like everything in the home has your stamp on it. And it’s all been customized, just for you. This is perhaps the biggest one of all the reasons to build a house.
The Cons of Building a Home
Although building your own home can be a thrilling experience, it may not be right for your family. There are many factors to consider, and your budget and the time you’ve allotted to get settled into your new home are crucial to your decision.
It takes more time to build a home from scratch
It can take more than six months to build a new home. So, if you’re in a hurry to move, building may not be the best option compared to buying.
A new home build can be quite expensive
When considering the cost of building vs. buying a house, building a house from the ground up comes with a hefty price tag, and can often be more costly upfront than buying an existing home.
The Pros of Buying a Home
For many, buying a home is just as satisfying as building one. Although it is a big investment, there are some excellent advantages to purchasing a home that’s already been built. Here are three pros owning your own home!
Lower costs and an expedited timeline
Though building your own home may be great, buying a home and making upgrades over time can help cut down on up-front costs.
Buying a pre-built home is a faster route to closing
In most cases, when buying a home, the buyer can move in immediately after closing. There is no wait time or temporary housing to worry about, which is perfect for movers on a deadline.
Location opportunities
With existing homes, you can choose virtually any neighborhood or area. This is especially nice if you have a specific location in mind!
The Cons of Buying a Home
Purchasing an existing home is an excellent investment. However, it might not be ideal for your family’s unique lifestyle. Here are some cons of buying a home to consider before home purchase.
Unexpected costs and "hidden fees" to consider
With older homes, the odds of you having to make repairs are higher than with a new, recently built home. You never fully know until you’ve lived in a house for a bit what repairs are essential to the health of the home, so it’s hard to budget for these fixes.
It’s a fixed layout, so it can’t truly be customized
Designing and building your own home gives you a lot of freedom when it comes to creating an interior layout and floor plan. Since the house is already built, you’re limited in terms of altering the existing floor plan. However, if your budget (and home design) allows for it, you could add on say, an enclosed patio for more square footage, or turn the garage into an extra room.
Remodeling/Upgrade costs
When buying a home, you might have to invest some time and money to bring the home up to current decorating standards by removing wallpaper, changing paint colors or updating flooring. Which could be great for those DIY masters out there, but maybe not for others.
Financing a New Build vs. an Existing Home
Another key aspect to consider when thinking about your next home is financing. Closely consider the following factors when weighing the cost of building a house vs. buying house.
Know the 28/36% rule
Mortgage lenders use this guideline to determine how much home you can afford. It means that 28% of a family’s pre-tax income is the max amount they can spend on a new mortgage. The second part of the equation means that your debt should not exceed 36% of your pre-tax income.
Consider your future too
Even if you can afford the cost of the new proposed mortgage based on the 28/36% rule, this doesn’t mean that as your family grows, you’ll still be able to manage those payments. Consider your earning potential and if its sustainable; also have a solid understanding of that student loan debt you may not have started paying off yet.
Location limitations
Do you have a specific neighborhood in mind for your next move? If so, building might not be for you. To build a house, you need a plot of land, and you may not be able to find one in your preferred living area.
Build or Buy, American Family Insurance Has a Homeowners Policy for You
These pros and cons are a great guide when you’re first thinking about whether to buy or build a home, but ultimately the decision is yours. What works better with your timeline? Your lifestyle? Your budget?
Before you even move the first piece of furniture into your beautiful, new home, give your American Family Insurance agent (Opens in a new tab) a call. You’ll also need a new homeowners insurance policy whether you build or buy a home. The great news is, you can customize your coverage. This gives you the confidence that comes from knowing you’re protecting what matters most to you.
This article is for informational purposes only and includes information widely available through different sources.
Related Articles
- 9 Steps to Create a Home Inventory for Insurance Claims
Your home is more than a roof over your head. It’s where your dreams grow, your family thrives and memories are made. But the possessions you keep inside are important, too.
Whether you’re renting an apartment or own your home, you’ve most likely got an insurance policy designed to protect your dwelling and the things inside. Should the unthinkable happen and you have to use that insurance policy, it’s important to have a plan in place. And a home inventory list is a great way to get started!
We’ll walk you through how to create a home inventory so — in the event of the unexpected — you’ll be more prepared and have a streamlined recovery.
What Is a Home Inventory?
Quite simply, a home inventory is a complete list of all the items, especially valuables, in and around your home. The best home inventories include photos, descriptions and dollar values of each of your belongings. The more detail, the better! It’ll help you provide a comprehensive list to your agent of items lost in the event your home is damaged or destroyed, allowing you to get the most out of your coverage.
When your describing the items in your list, remember that the more information, the better. Here’s a quick reference list of the type of information you should include in your home inventory list:
- An in-depth description of the items. For example, rather than writing down “diamond ring,” be more descriptive, such as: “an emerald cut diamond ring, with white gold shank, accent stones and initials inscribed below the bridge.”
- Make, model, and/or serial number of the items.
- Date of purchase, receipts and photos.
- Estimated replacement cost if you bought it today. Do note that the value of the items might be different today than it was when you first bought them. This is especially true with jewelry, and other valuables.
- Appraisals at time of purchase. Especially if your items were appraised for insurance purposes.
Why Do I Need a Home Inventory?
Whether you’re a homeowner or a renter, everyone can benefit from a home inventory!
If you ever have to make a claim, a home inventory is a great asset to have, especially after stressful events like theft, storm damage or a fire (take a look at how one renter used their home inventory after facing an apartment fire).
When you make a claim, you typically submit information on everything that was lost — which can be difficult to do off the top of your head for all your possessions. Remembering to replace your TV or computer are no-brainers, but when it comes to remembering each piece of jewelry in your jewelry box, things tend to get overlooked. Having a personal property inventory will help, along with knowing how to properly insure your jewelry.
When you have your home inventory checklist, you know exactly what needs to be replaced, and you’ll have peace of mind knowing your entire household is protected.
- Reasons Why a Roof Leaks
You’re admiring the rain from the comfort of your home when you notice a sound — the unmistakable drip of water dropping onto your floor. The first and hardest step is figuring out why your roof is leaking. And with these tips, you’ll find the culprit in no time!
Here’s Why Your Roof Is Leaking
The list of reasons why your roof is leaking may seem long, but don’t worry — when it comes to finding the leak and fixing it, the finding is the hardest part. And the good thing about these problems? They can all be fixed. Check out the list and see what’s troubling your roof:
Your roof is old
Roofs don’t last forever. Protecting your home and everything inside it from the elements comes with a cost. And with all that rain, snow, ice, wind and even sunlight wearing down your roof, it becomes more susceptible to leaks. Every roof will eventually need to be replaced, so learn more about how long your roof should last based on what it’s made of.
- How to Check Your Roof for Storm Damage
There’s no good time to find out your roof needs repair — but you may be able to mitigate that pain by routinely checking your roof for damage after severe weather. Waiting for a leak or damage to present itself gives the problem time to grow and worsen.
And sometimes, you’ll be faced with expensive roof and interior damage repairs if you’re not diligent. By being proactive and checking your roof for damage after severe weather hits can help your roof — and your savings — stay healthy.
