Step 1: The Pros and Cons of Building a House

Which do you prefer: a house with history or one that’s brand new? While there’s something special about buying a home that’s stood the test of time (the expression “if these walls could talk” comes directly from older homes having fascinating history), the idea of being the very first owner of a house is equally intriguing. A custom layout, handpicked fixtures and finishes, modern appliances — it’s no wonder why newly constructed homes are appealing. New builds often require little maintenance for several years, and they’re often more energy efficient.

But building a home can also be overwhelming. There’s a time element involved, along with some trepidation over making the wrong decisions. If you choose high-end everything, you could go well over budget, but if you go with just the basics, you might regret not choosing a few upgrades. In this how-to guide, we’ll explore how to navigate the building process from start to finish, and how to make the best decisions for you and your family.

If you’re still trying to decide if new construction is right for you, here are some of the benefits and drawbacks of buying a newly built home.

The Benefits of Buying a New Home

  1. Quality construction. With advances in technology and construction, home builders today often use state-of-the-art materials and techniques, and they must follow the latest state and local building codes. You’ll have peace of mind knowing that builders must strictly comply with code regulations from layout and structure to insulation, cladding, roofing, plumbing, and electric and mechanical work. Safety features are up to date and typically include smoke detectors, ground-fault circuit breakers that reduce the risk of electrical shock, and exit routes from the basement.
  2. Energy efficiency. New homes are typically about 30 percent more energy efficient than homes built even seven years ago, according to the US Department of Energy. They save at least 3,449 KWH per year, on average — that’s enough energy to power your TV for 11 years.
  3. Less maintenance. You’ll be able to move into your home and enjoy it for several years before any work needs to be done. In addition, your new property’s appliances, products, and the home itself may have warranties. Builders sometimes offer warranties for about one or two years on systems and materials, along with warranties for up to a decade on the structure of the home and roof. You shouldn’t have to replace big-ticket items like the roof, water heater, or plumbing for up to 20 years.
  4. Customization. Sure, you can make any home your own with some remodeling, but with a new build, you’ll have the chance to create the home of your dreams. You’ll select the floor plan, the color and materials used in countertops, tiling, hardwood floors, and carpeting. You’ll even choose tiny details like door handles and window blinds. You can request bigger closets, a kitchen island, heated floors, an open floor plan, or have walls pre-wired for flat-screen televisions. You can even add some unique upgrades like a wine cellar or an office with ample natural light.
  5. A modern living space. Smart home technology, open concept kitchens, and floor plans that utilize every square inch define the modern home. The average resale home is about four decades old. This means outdated floor plans designed for life 40 or so years ago. Older homes often have separate living and dining rooms or shared bathrooms to accommodate several bedrooms, unlike today’s modern builds that account for multi-generational families and technology-driven lifestyles.
  6. Better resale potential. When it comes time to sell, you’ll have an easier time selling your home compared to those trying to sell a house that was already decades old when they moved in. Homeowners with older properties often must make expensive repairs and renovations before putting their homes on the market.

The Drawbacks of Buying a New Home

  1. If you’re going to build a home, expect to pay at least 20 percent more than it would cost to buy an existing one. To help you navigate the home building process and make sure you don’t blow your budget, it’s a good idea to have a real estate agent at your side. They’ll know which upgrades are worth the extra cost and which ones you should probably skip. There could also be additional costs along the way. You won’t know for sure how much the home will cost until the build is complete. You also likely won’t be able to negotiate the cost. Home builders usually have a very firm price, which means you won’t be able to talk them down as you would when buying an existing home.
  2. Since neighborhoods closer to the city center tend to be mature, most new construction will be farther away, often in suburban or even rural locations. If you prefer to be near downtown, it may be difficult to find land for sale or new builds.
  3. When you buy an existing home, you can typically move in right after closing, so it’s easy to schedule your move-in date. When you build a house, you may have to wait a year or more before you can move in. There may also be building delays to contend with. This could make it much more difficult if you’re also selling your current home. If your house sells before your new build is complete, you may have to negotiate with the buyers to rent back your house until your new home is complete, or you’ll have to find a short-term rental. If you’re currently a renter, you might have to move out when your lease is up and find a temporary living arrangement, sign a new lease and risk breaking it, or find a month-to-month rental, which can get expensive.
  4. If you’re buying in a new housing community, the land is often bulldozed completely to make it easier for builders. This means you could end up in a neighborhood without any mature trees. You’ll probably have to install your own landscaping, and any trees you plant will take years to mature.
  5. Construction loans can be more difficult to get. Since the house doesn’t exist yet, it’s riskier for the lender. Because of this, it’s tougher to qualify for a construction loan than it is a traditional loan. In addition to excellent credit and a low debt-to-income ratio, you may also be required to put 20 percent or more down. Construction loans are usually short-term, covering expenses like buying the land and purchasing materials. Some of the loans convert to a traditional loan after the building phase is complete, so be sure to research the different types of loans and discuss your options with your realtor.

Weigh the pros and cons of building a new home carefully and consider what works best for you. If you enjoy having a lot of choices and making decisions, you might like the process of choosing materials for your house. On the other hand, if this seems overwhelming, you might be better off finding an existing home that appeals to you. Review your finances, as well. Since unexpected costs are more likely and more frequent when building, you’ll want to make sure you can afford whatever issues arise. Finally, make sure you’re comfortable with remaining where you are for at least a year — it might take that long to build a house, so if you’re in a hurry to move, building might not be the best option for you.

Once you’ve decided to build, the next step is to determine the type of new home build you want, define your must-haves, and settle on your home’s size and style. Let’s review these decisions in step two.