A Homeowner’s Guide to Buying Land and Building a House

In the United States, over 1,000 new houses begin construction every month.

In today’s housing market, it is oftentimes cheaper to build a home instead of buying one. You’ll also get the peace of mind knowing all your appliances are brand new and bound to last for years.

However, you need to do some homework to ensure that that the plot of land you buy is ideal for building. One wrong move and you may be paying more out of pocket.

We’ll tell you what you need to know about buying land and building a house. Let’s get started!

Making Sure the Lot Is Buildable

You may fall in love with a plot of land but discover that you aren’t allowed to build on it. Subdivision regulations, zoning ordinances, or building codes may get in your way.

One way to avoid this is to hire a land planner. Like you’d hire a home inspector before buying a house, you should hire a land planner before buying land.

You should also consider hiring your builders first to ensure that the land can support your dream home. They can tell you if you’ll need to clear the land of trees, roots, or vegetation.

If the land has never been developed, you may need to install water, sewer, and power lines. You can contact an electrical contractor or a water and sewer contractor for price estimates.

Buying Land and Building a House

You can either purchase the lot in cash or by taking out a loan. Cash is the easiest and most common option for purchasing land.

When taking out a loan, you can get a land loan, construction loan, or construction-to-permanent loan.

A land loan is a good option for those who want to take their time with the construction project. You can purchase the land without having a builder or building plan ready to go.

A construction loan is for those who already have building plans and a builder. Funds are dispersed periodically and can also be used to build the house. The more detailed your plans are, the better odds you have for approval.

A construction-to-permanent loan is the most common type of loan for buying land and building a house. It will cover the cost of building your home, and when the project is over, it converts to a permanent loan. This is the most cost-effective option. 

Hiring Contractors

You’ll need to hire an architect to design the house and builders and subcontractors to build it.

If you want a one-stop-shop, consider hiring a design-build firm. They employ all the builders you need, and if they need a specialist, they’ll call one in for you.

 

When meeting with different firms, they’ll give you an estimate of how much the project will cost. Try to meet with at least two or three firms so you know you’re making the best decision.

Be careful with going with the lowest bid, however. Sometimes firms bid too low and you’ll be paying more in “unforeseen costs” down the road.

Finally, keep a flexible timeline. That will relieve pressure from you and the contractors, as well as prevent you from moving into an unfinished house.

Living in Your Dream Home

It may seem like a daunting project, but buying land and building a house is achievable with the right team.

Need some inspiration on how to design your home? Check out our other articles for some ideas!