Is It Cheaper to Buy or Build a House? Mistakes to avoid: When it comes to getting yourself a new house, people often take into consideration every possibility out there. It is perfectly normal to consider various options before settling down to which one seems more viable especially in terms of money. Getting a new house is a huge investment so comparing multiple options to find out which one is cheaper and more economical for you is the smart thing to do. Impulse buying is clearly not the way to go when shopping for real estate properties. And it is not just about the payment at hand it is also important to put deep thought into the long term benefits and the long term financial aspects. In case, you also need 2D or 3d floor plans, here we can assist you.
Similarly, you may consider what is cheaper for you in terms of either buying or building a house. Buying a house sure does save up on time and the effort that is put into having your house built. You simply have to find the best house out there for you and put up a bid or make an offer. Having said that, buying a house that suits your needs is also a task at hand that requires house-hunting which is not an easy thing to do. However, it does save up on the efforts construction, labor costs, and having the designed and built.
Of course, it is not smart to consult a real estate agent in this matter as they are more interested in you buying or selling a house and will not be interested in giving you the honest opinion related to building a house regardless of whether or not they have the proper knowledge of construction costs in comparison to the market sales prices of purchasing a fully constructed new house.
It is important to consider what range of houses you are looking into, if you are looking for a house on the higher end, construction costs may weigh over and you will have to do the required market search according to the area that you are looking to get a new house in.
Though buying a house may seem like a simpler option, in terms of cost, it may not be the best option. Buying a house means paying the market rate which fluctuates, mortgages go up and down. Construction costs including the cost of land can more often than not be proven to be cheaper and more affordable. For example, if you want to build a house of median size at the rate of $103 per square foot, it is still less than what you would most likely pay to buy a built house.
If you are looking to build a customized, environmentally friendly house then, of course, the construction cost will go up but the long term cost of living in the house will be way less. However, if sustainability is not the matter for you, then you can find a cheaper house that is preowned rather than a brand new house which might be more affordable than building a house, but if you consider the renovation and maintenance costs of a preowned house then you might as well just build a new one, because even if it does cost you a little extra, it’ll still be brand new and will cost less in maintenance.
So, at the end of the day, there are many factors that go into the decision of whether it is cheaper to buy a house or to build it but most likely the apparent economic choice would be to build a house according to your needs and save up where you possibly can.
Mistakes to avoid when buying a new house (Buy or Build a House?)
Purchasing your own home is usually a big decision that you must take with care. Simple mistakes and negligence can be very costly. This big step can also become challenging, daunting and free from excitement. This endeavor requires an enormous financial commitment which makes it important to prevent any mistakes that can adversely affect your investment.
We list some mistakes that can have adverse effects on your home buying process. Some mistakes also lead to difficult issues to rectify. Make sure you avoid these mistakes.
Absence of a defined budget
The amount the bank informs you as your budget is usually not the right budget. Even though spending that much money is comfortable, you still need to have a very clear budget. Avoid depending on what the bank tells you as your budget. Rather, create an outline and incorporate all your expenses in a month such as your loan payment, credit card payments, savings, insurance, rent and so on. Subtract this from your income and you will have a clear idea of how much you can afford.
Having a defined budget will enable you to know the price range of the house to hunt for, rather than wasting your time on assets that are way more than your spending budget. This will help you avoid future financial problems.
Ignoring mortgage qualifications
It is important to have a pre-approved loan before making an offer to gain a home. You should be aware if you qualify for a loan because every loan has its requirements. For instance, applying for a reverse mortgage requires you to have all the details on the reverse mortgage. It is essential that the funds the bank releases fit the offer you make for the house. There is a tendency that the bank will accept or reject the loan offer when you have an unstable income structure or poor credit history even after making the offer for the home already.
You must take care whenever you have a pre-approved mortgage because a major credit score change can make the deal fall through and when this happens, you might have to give up a lot of money.
Neglecting additional expenses.
You need to consider many things when buying a house. It goes beyond migrating from paying rentals to mortgages. There are other expenses such as the homeowner’s association fees, home insurance, closing charges, property taxes and so on. Although many homeowners consider many of these costs, they might also neglect hidden costs like maintenance and repairs. There is every tendency that the budget on the home might become bigger when you incorporate all these hidden and extra costs.
You can make inquiries about the average cost of maintenance, tax, insurance, to have an overview of what to expect.
Neglecting a comprehensive inspection
Avoid jumping onto an offer after viewing the exterior part of the house. There are possibilities where houses with amazing exteriors turn into a nightmare. Neglecting comprehensive inspection can lead to spending money on unforeseen repairs. Try to always take advantage of properly inspecting other areas of the house such as the interior, the roof, the water tank and so on. This will help you understand the actual condition of the property.
Ignoring down payments
Remember the financial housing crisis that occurred in 2008, where banks gave mortgages to homeowners who could not afford the down payments? Remember that whenever a down payment is skipped, the mortgage together with its interest increases. This will subsequently increase the insurance on the house until you clear about 20%.
Avoiding the services of an experienced real estate agent
A common mistake most home buyers make is to reject the services of a professional real estate agent. Real estate agents have immense experience in handling similar negotiations and transactions with adequate knowledge about the prices of the property in that vicinity. Using the services of a real estate agent will help you make rational decisions when things become challenging and keep the entire process in control.
Taking hasty decisions
Different emotions may fly high when shopping for a home that could cause an untimely and sudden decision that could lead to future regrets. Get ready to invest a lot of time when searching for a suitable home to avoid subsequent disappointments.
Spending too much before closing the deal
Gaining debt before buying a property shows that you are not eligible for the initial bond. You need to hold off on purchasing new gadgets and furniture until the deal has been closed.
Mistakes to avoid when building a new house (Buy or Build a House?)
When planning to build a new home, especially for the first time, you are liable to fall into several mistakes, pitfalls and you can avoid these by looking at the project from different angles. You also need to consider the structure of your family, convenience, lifestyle, and your budget. You can make efficient decisions by using the services of professional builders, architects, and engineers. They will guide you through the entire process and help you avoid the following mistakes.
Ignoring the HVAC system
Neglecting the HVAC system of your new building can cause the development of mold, which has an adverse effect on health. You should also consider the size of the units that you would install. A small system won’t heat or cool your home. The hot summer months will disappoint you, when it doesn’t efficiently cool, or heat in the cold winter. Alternatively, systems that are too large will also use up too much energy.
Improper planning of the home space
Planning the home space is very important except if you are developing a massive structure. Apart from having sufficient space for storage, the location of the storage is also important. Did you add more than sufficient space in your master bedroom that you could incorporate into your master bath or a walk-in closet?
Always remember to consider the location and size of your closets. Are you building in an environment that is freezing and requires a coat closet? Do you need a mudroom or a closet in the foyer? You need to consider all these necessities and include them from the onset when planning. If not, don’t include them.
Poor lighting and ventilation
The lighting system and outlets in your home and windows should be sufficient. Windows should also be available in each of the rooms. It should be large as well to permit natural light into the room. You can also install skylight which would make natural light the primary source of light.
Improper location of important rooms
The location of your bedroom should be far from traffic and noise. You should locate it above or beside the garage as your family members might need to be coming in when you are still asleep. Ideally, your bedroom should be far from the garage and the central living room. It should be at the extreme of the house. We should not share the bedroom with the central living room.
Place your kitchen close to the main point of entry. This will save you the stress of having to go all the way through the house to access it if is at the extreme from the house. Preferably, you can locate it at the extreme or beside the garage while you might also locate it very close to the dining or the living space. People regularly access the kitchen, it is, therefore, advisable to control the traffic from the living space.
One of the best places for your garage is beside the kitchen or the mudroom. You can limit the dirt you generate from the constant coming and going, to the mudroom and the kitchen.
Failure to test builders and contractors
Building contractors usually offer their clients the schedule and information about the project. Ensure that you screen the information you receive from the contractor and test it before signing. You can request for legal advice if you have doubts or if you are not comfortable with any of the process before the construction begins.
Also, make sure they include the delivery dates and cost projections so you won’t be liable for any other additional expenses.
Not monitoring your spending
Irrespective of how large your spending budget is, if you don’t monitor and control your spending, you might end up incurring additional costs and charges.
First, you need to decide how large you want your new home to be, then the design and the materials that you will use. You can then search for mortgages from the agencies that fit the home you want. You also need to stop eyeing that new furniture and vehicle until you sign off your mortgage. Huge debts like these can affect your mortgage qualification and debt to income ratio.
Once this ratio gets very low, there is every possibility the interest rate on your mortgage will also be low. Finally, always remember to be definitive about the layout of your new home to avoid extra costs during construction.
Undoubtedly, we associate building a new home with several challenges, but adequate planning and preparation can help you avoid mistakes common to home builders. Buy or Build a House can be decided by comparing the pros and cons as given above. And, we have also discussed the mistakes when deciding to Buy or Build a House.