How Much Does It Cost to Build a House?

From the availability of houses on the market, to competition from other buyers, to wanting custom features – there are many reasons you may be looking into building your own home.

But just how feasible is it for you to build your own home and stay within your budget? It might actually be more realistic than you thought.

Home Advisor collects and reports data on new home construction throughout the US. As of 2022, the average cost to build a custom home is $280,173. This compares to existing home sales, where the average price was $546,800 as of July.

There are several factors that contribute to how much it will cost you to build your own home, though. We will cover what goes into building a custom home, how you can budget for your own new construction, and where to get started on financing options.

Buying vs. Building

You might already know that you want to build your own home. Buying a new-construction home means that you’ll be the first one to live in it, and you won’t have to worry about maintenance issues that might have built up over time. If you’re buying in a new neighborhood or development, it also means you’ll get to experience the launch of an entirely new community.

For other buyers, you might be debating between buying a home on the market or purchasing a newly constructed one. There are certainly advantages to each, and your decision will most likely come down to how quickly you’re looking to be in your new home and if you find a house in the existing inventory that meets your needs and expectations.

Another factor that affects buying versus building is where you’re looking to become a homeowner. Some parts of the country, like the Northeast, have overall higher building costs than the South and Midwest, for example.

What Goes into Building a Custom Home?

As you’re considering your new home budget and if you can afford to build your own custom home, it helps to understand the breakdown of the various costs associated with a new-construction home.

First up is buying and preparing the land for your new home. If you’re buying from a developer, this is going to be included in the purchase price. But, if you’re planning to find your own lot, this is an important cost to research and take into consideration.

Then there are the plans and permits. These costs will likely be included in the sales prices for new community developments. Otherwise, they can vary depending on how complicated the design of your new home is. Permit costs will also vary by location. You can get quotes for both of these from architects and contractors that bid on your job.

Next, you’ve got the foundation and framing. Your foundation will likely be a concrete slab and includes your crawl space or basement. Your team will then build up the walls and roof structure.

After that, your contractor will complete the plumbing, electrical wiring, and home exterior. This includes installing all of your major home systems and getting them connected.

Finally comes your interior finishes. This includes your flooring, doors, cabinets, countertops, etc. This is usually the part of the process that can add up quickly, depending on your selections. It’s also usually the largest part of your home construction budget.

Understanding these major steps in the construction process and thinking through your preferences for each of them will help you develop a rough estimate for your new-construction home.

How Much Does It Cost to Build a Home Right Now?

Bearing in mind that breakdown of the costs of building a new home, the current average cost to build your own home in the US is $280,173.

While that’s the nationwide average, it can be much more useful to review your state’s average. This will give you a more precise range of what to expect depending on where you plan to build your home.

In general, the Northeast is the most expensive area to build, followed by the Western states, then the Midwest. The South and Southeast come in at the lower end of the range.

Financing Options for New Construction Homes

Now maybe you’re thinking, “That’s great that I have an idea of the cost,” and it can certainly help you prepare a more accurate budget.

But most homeowners throughout the country finance their home purchase, whether they’re buying an existing home or building a new one. So, it’s just as important to know what options are available to you for home construction financing.

There are two main types of construction loans. The first is a one-time close construction loan. The major benefit of this option is that you only go through one approval and closing process, so you only pay one set of closing costs. It’s an Adjustable Rate Mortgage (ARM), with interest-only payments during the construction phase of the loan Once construction is complete, the loan automatically converts into a fully amortizing mortgage with periods of a stable interest rate and a variable interest rate.

The second common option is a two-time close construction loan. This option breaks up the loan process into two parts: an initial, short-term construction loan, followed by a typical mortgage. Once construction is complete, the initial loan is refinanced into a mortgage – also referred to as permanent financing. Because these are two separate loans, you’ll go through two separate approval processes and closings. A major benefit of this model is that you have access to the full selection of loan types available at the time of conversion to permanent financing.

Whether you decide to buy an existing home or build your own brand new one, we hope you’ve found this resource for understanding the costs of building your own home useful in your homeownership journey.

Our loan officers are leading experts on construction loan programs and are always available for a free consultation.