How Much Does it Cost to Build a Home?

5 minutes read

Finding a home that is perfect for you can feel like searching for a needle in a haystack. You might find homes with some features you love, but others that you hate. Do you have to sacrifice? The answer isn’t as cut and dry as you would hope. Honestly, it is a personal decision. You have the option to start from scratch with your own home; however, the cost to build a home can get quite high. The national average to build a home equals around $150 per square foot. For a 2,000 square foot home, this means $300,000 at a minimum. Before you decide which way to go, consider everything that goes into building a new home so you can see what is right for you.


The first step is finding the right land. You cannot build a home unless you have the land. If you don’t already own a piece of property, you have to purchase one. This could factor into the cost of building a home. There are several options for you to purchase the land to build a home, though. Of course, you can pay cash – no one will turn that down. However, if you don’t have the capital to pay for it outright, you can secure a land loan. This loan provides you with the funds to purchase the land separately from any funds needed to build the home. Down the road, once you have your construction loan and your home is complete, you can refinance both the land loan and construction loan into one mortgage.

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There are several options to choose from when you decide to build a home. You can run the entire process yourself – hiring the architects, contractors, and other professionals as you need. This is the most costly and time consuming option. Even if you hire a general contractor to oversee the entire process of building a home, when everything is custom or created from scratch, it will cause your expenses to rise dramatically. Just the cost of the architect alone can increase the price of your home by as much as 15%.

A few other options you have aside from custom home building are modular and “cookie cutter” homes. Modular homes often offer significant cost savings because parts of the home are prefabricated in a factory. Modular homes used to be thought of as the “poor person’s” home because of their inability to have any customizations. Today, however, there are many ways to customize a modular home – you do not have to simply take whatever the builder puts together. Because the contractors complete a majority of the work off-site, the costs for a modular home are significantly lower than a custom home.

Lastly, cookie cutter homes or developer homes are those which the builder has designs for and allows minor customizations. You can purchase a home based on the created blueprints or as a home already built and waiting to be moved into. Either way, you save money as you would with a modular home. The amount you save obviously depends on the number of changes you make to the home and the status of the home before you purchase it. For example, builders who have already built homes sitting vacant will be more desperate to sell the home than they would for a home they did not start construction on yet.


The people you need working on your home greatly affect the cost to build a home. For example, if you choose a modular home and make very minor changes, you don’t need an architect or designer. If, however, you choose to build a custom home, you may need the help of every professional available from architect to design companies. Each professional adds a significant amount to the cost of the home. For example, a professional architect can raise the cost of your home by as much as 15% for his services.


Building a home is scary business. This is why there needs to be many checks and balances in place in order to ensure everyone is safe and the home is built right. Insurance, permits, and periodic inspections are just a few of the things you need to consider when you build a new home. If you have a general contractor overseeing your project, he usually handles all of these aspects. As everything else, though, permits, insurance, and inspections cost money. Every time someone has to step foot on your property, it costs you money. The insurance you need for the property is also a cost factor – the more people working on the property and the longer it takes, the more the insurance costs.


Aside from the professionals working on your property; its location; and its size are many other variables you must consider to determine the cost to build a home. Here are a few things to consider:

  • What will the square footage be?
  • Do you need a basement or attic?
  • Will there be more than one story?
  • What type of material will you use for the exterior siding and roof?
  • What upgrades will you make to the interior of the home?
  • Will you need professional advice from any other industries?

Obviously, the larger the house, the more stories it has, the more expensive it is to build. If you need a basement or an attic, this adds to the cost. If there are complications with the land, you may have professional consultations that cost you more money to help determine the best way to build the home. The materials you choose for the interior and exterior of the home also play a roll.

You have full control over the cost to build a home. If you cannot afford the costs, you can scale back on certain things to make it more affordable. Before you set out to build a home, it is best to create a budget. This way you can share this budget with everyone involved in the process. When everyone is on the same page, it saves you from making choices that you cannot afford. This typically causes headaches and obstacles down the road as you feel like you have to sacrifice the things you “really” wanted even though you couldn’t afford them.

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