Building vs. Buying – What’s Right for You?
It’s the classic conundrum for homebuyers – should we buy or should we build? If you’re on the fence, here are a few things to consider when making your decision.
Loan Options
There are different options available depending on whether you will be financing a mortgage for buying an existing home or getting a loan for building your home. According to a Capital One article, both building and buying an existing home will require the help of a lender in most cases. However, the financial differences between the two could help sway your decision significantly.
Available Loans for Existing Homes
Typically, when buying a home already built, you have a few different loan types available. There is a conventional loan requiring the traditional 20% down payment that has as a fixed term and rate. The government also provides loan options such as a Federal Housing Administration (FHA) loan which helps buyers who intend to live in the home and can meet the cash investment (usually 3.5%) and credit requirements. If you are considering living in the rural parts of town, the Rural Housing government loan program is an option. This type of loan is intended to help low and moderate-income families purchase homes that fall within the rural map qualification areas with little or no down payment. For more information on this program, visit their website.
Available Loans for Building a Home
When obtaining funds to build a home, whether you are buying a lot in a neighborhood that already has a builder is pertinent When the builder owns the land, you can use one of the loan types previously mentioned.
If the builder does not own the lot, you will need a construction loan, which comes from a bank as opposed to a mortgage lender. There are few banks that offer this type of lending. With a construction loan, the payments are drawn at different intervals of the building process as the home is completed. Additionally, you can you can include the purchase of the land as well as the cost to build the home in the loan.
Pros and Cons
There are many pros and cons to building vs. buying. First, it’s important to look at the time frame you will need to move. A typical settlement process for buying a home is 30-45 days. Whereas, if you are building a home, the minimum time-frame needed is approximately 8 months and that is providing there are no delays.
Some of the pros associated with building are the ability to pick your own builder and the ability to customize any and everything. You are also able to pick the placement of the home on the property which is critical for several religious beliefs.
Potential downsides of building could be construction delays due to weather permits or contractors and what if your builder went out of business? These are all things that are out of your control as the home builder and could severely delay your deadline to move.
On the other side, if you buy an existing home, you can negotiate with the sellers to fix any issues. You can have a quicker turn around for move in and you don’t have to worry about incomplete construction or weather deferring when the build will be complete.
Need help deciding?
When it’s time to buy your next home, what will be right for you- building or buying? If you still aren’t sure about building or buying, visit our website to see what’s available in your desired location and to connect with one of our agents about your options. We are always here with your best interest in mind as you take Your Trip Home.
Posted in Buyers