The average cost to build a house
Finding the perfect home on the real estate market often proves difficult. With so many buyers scooping up homes as soon as they go for sale, it can be tough to get a foothold in the right property.
This frustration has led some property owners to build a custom home that fits their exact needs, without having to compromise anything on their home buying checklist. With the right know-how and a detailed plan in place, it is possible to build a home of your own.
However, the biggest hurdle of all will be the price tag. As you can imagine, building a house is a costly project with the potential for expensive issues and long delays. Without proper financial planning, building your own home can quickly become overwhelming.
Altogether, the average cost of building a home is about $300,000, according to the NAHB. Let’s break this price down and take a look at the cost of different stages throughout the home construction process.
Steps of building a house
- Buying a plot of land
- Blueprints & permits
- Preparing the foundation
- Framing & walls
- Electricity & plumbing
- Interior construction
- Miscellaneous additions
Buying a plot of land
Before you start building your home, you’ll need a suitable plot of land. Finding the perfect spot to start building can be tricky, since the sales price depends on the size and location of the property.
According to NAHB, the median lot price for a single family home in 2019 reached $49,500, meaning you should expect to pay at least $50,000 before you can put shovels in the ground.
In addition, you might have to pay for tree & root removal or clearing of the land if an existing building stands in the way, which can come to about 5% of the total construction cost on average.
Homes can’t be built just anywhere, so simply owning some property won’t be enough to get started. Before purchasing a plot of land, be sure to check local zoning ordinances and permit restrictions to avoid any unexpected legal interruptions to your home’s construction.
Blueprints & permits
Once an appropriate piece of land is purchased, the home construction planning stage can begin. This involves having an architect draw up blueprints, hiring contractors and purchasing the right permits.
If you plan to finance the building of your home, you and your lender will agree to a strict construction timetable where any delay or deviation from the plan can result in steep fines. A thoroughly planned and well organized construction project avoids these costly interruptions by establishing a detailed plan before building can even begin.
The cost of blueprints and permits will vary depending on the complexity, size and features of your envisioned home, but came to an average of about $18,000 in 2019.
Preparing the foundation
Now that the land’s been purchased and the blueprints are ready, you’re ready to start building. The first step in any building’s construction is preparing the foundation. The contractors you’ll have hired will now come in to dig out the land and add the foundation.
Concrete is typically used for basement foundations, but other options are available, each coming with their own prices, advantages and drawbacks. Do some research before deciding on a material to find one that suits your needs and fits your budget.
According to the NAHB, the average cost of installing a foundation comes to just under $35,000.
Framing & walls
Once the foundation has been established, it’s time to put the house’s frame together. This includes the wood used for the home’s structure, floor, ceiling and walls.
For all of these materials, plus the cost of labor, you can expect to pay around $51,000 for this step in building your own home.
Electricity & plumbing
When the frame is built, you’ll be able to start installing amenities like plumbing and electricity. You’ll likely be hiring outside help once again, so the cost of an electrician and plumbing installation team should be worked into your budget.
On average, installing pipes and connecting your new home to the grid will come to an average total of about $43,000.
At this point, you’ll have a floor, ceiling and walls, but the interior of your home will still need some touching up. Insulation, doors, cabinets and countertops are all installed at this stage, turning your building’s frame into a cozy place to call home.
Since this step involves so many different materials and differing construction details, it can come to one of the more expensive aspects of home construction. As of 2019, the average cost of interior finishes came to about $75,000.
While the construction of the interior is underway, you can get started on some of the external elements of the home. Decks installation, landscaping and underground pools can all be added to boost the home’s curb appeal and hopefully up the value.
On average, adding external elements to the home can cost around $20,000
Home construction loan
Mortgages can be used to purchase an existing home, but building one requires a different kind of financing.
Home construction loans offer a short-term, high-interest lending structure that fund a given amount to build a residence.
On a typical home loan, the lender puts a lien on the existing property, allowing them to resell the home back on the market if the owner falls into foreclosure. This lien mitigates the lender’s risk associated when financing someone’s home purchase. The extra assurance allows them to offer comparatively lower interest rates on conventional mortgages.
When you still have a home to build, however, there’s nothing for your lender to use as collateral. This means they’ll take on much more risk when issuing a home construction loan, and will attach a higher interest rate as a result.
In addition to a high interest rate, home construction loans usually require full repayment in a very short amount of time. Most of these loans come with a one-year amortization schedule, and can include contingencies that require the home to be built on schedule.
As the borrower, this makes having a detailed construction plan is essential to a successful and well-budgeted project. Keeping things on track not only gets your construction completed on time, but can save you thousands in fees if the schedule needs to be extended.
Matched with the short-term nature of these loans, home construction financing requires a strict schedule in terms of both building and repayment. Adherence to this schedule can be the difference between a completed home and an empty lot, so be sure to have a solid repayment plan in place.
With a strict budget and solid construction partners, you’ll be able to build your home on time without expensive delays. While building a home is expensive, strong planning can make this dream become a reality.
If this path to homeownership carries too much risk, there are always additional mortgage lending options available.