Most people in the market for a new dwelling will buy an existing home that more or less fits their needs. But new homes don’t come with the problems that old homes might, from lead paint to a kitchen crying out for remodeling. And building a house may seem attractive because you can construct it to fit your specifications, from the number of bathrooms to building an outdoor kitchen.
If you’re ready to build your own house, here are the steps to take.
10 Steps to Building Your Own Home
Condo. Townhouse. Single-family home. Modular or manufactured home. Cabin or even houseboat. A house hunter has all of those types of homes to choose from. If you’re building a home, you’ll have a lot of choices to make as well, starting with where your home will be located. Here are the steps to building your own home:
1. Find a Location
The first thing you’ll need to do is find a site that’s zoned for a residential property. Look into local building regulations to see how much of the site you are allowed to build on and how far from property lines the building must be set back. Check ordinances that might limit size or height. Is there a homeowners association (HOA)? Scour the rules.
It’s generally suggested that you not spend more than 20% of your total budget on the building site. When you purchase the land, you will acquire a property deed, which will also act as the house deed.
2. Obtain Permits
Before a shovelful of earth is turned, the local building department must OK the plans and provide permits for the whole shebang: grading, zoning, construction, electrical work, plumbing, and more. When the permits are in hand, construction can start.
On a related note, at various points during construction, the home will need to be inspected for code compliance. If you are using a loan for new construction, your lender may also send an inspector to keep track of construction status before releasing payments from a construction loan.
3. Prep the Site and Your Finances
Site Prep
Before you start building, you’ll need to prepare the building site. You’ll want to be sure that soil conditions are stable. You may want to engage a civil engineer to give the site a look. A site surveyor can stake the property boundaries. Then you’ll need to clear brush and debris at least to 25 feet around the planned perimeter of the house.
Size and Cost
The cost of building a house averaged $313,884 in 2022, according to HomeAdvisor, the directory of service pros, but a typical range is from around $137,000 to $582,000. Obviously location, materials, and level of detail affect the bottom line.
But size is the biggie. The larger the build, the more labor and material costs you should expect. The average new home in the country has about 2,200 square feet at $150 per square foot, HomeAdvisor notes.
After the peak of the pandemic, there were months-long delays to receive materials, from appliances to garage doors, and construction costs increased. Oil prices significantly increased transportation expenses. Rising inflation left its mark, but prices leveled off in 2023. All of which is to say, cost numbers are a moving target.
Finance Options
When you build a home, you may need a loan that covers the purchase of land, buying materials, and hiring labor. In this case, you may want to look into a construction loan. Unlike mortgage loans, construction loans are not secured by an existing home, so approval might be tricky and take a bit longer.
The money is paid to your builder in installments. You’ll often only pay interest on the portion of the loan that has been withdrawn. After the typical 12 to 18 months of a construction-only loan, the usual route is to take out a mortgage and pay off the construction loan.
Other financing options are a home equity loan, if you already own a home.
A personal loan of up to $100,000 can pay for part of the construction (or maybe all, for a modest build).
If you’re buying the land, Federal Housing Administration (FHA) one-time close loans cover the lot purchase, construction, and permanent mortgage. But the loans can be hard to find and are tougher to qualify for than traditional FHA loans.
Check out these additional resources for homeowners.
Choosing Materials
Only an experienced and highly organized person may want to act as their own general contractor for a new house build. Most people will put the job in a contractor’s hands, and add 20% to 30% for the cost of materials and labor.
General contractors already have priced and sourced many of the materials when making a bid. They usually have relationships with wholesale distributors, lumberyards, and retailers.
That said, you may have some skills that you could apply to cut costs. For example, you could look into how much it costs to paint a house and determine if painting the home’s interior could help you save.
Building a Work Team
If you choose to fly solo, you’ll be on the hook for finding subcontractors yourself.
A general contractor will hire all of the team members needed to complete the project and charge 20% to 30% of the overall cost of the home. However, they also typically have regular relationships with subcontractors, who may charge them less than they would a person who hires them on a one-off basis.
As a result, you may not end up saving much or any money by finding subcontractors yourself.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
4. Pour the Foundation
Once the building site is cleared, construction can begin, starting with the foundation. Some houses are built on level slabs of concrete that are poured on the ground, leaving space in which to run utilities, like plumbing and electrical.
A home with a full basement requires that a hole is dug and that footings and foundation walls are formed and poured. The concrete will need time to cure, and no construction will take place until it has set properly.
5. Set Up Plumbing
Once the concrete has set, crews install drains, water taps, the sewer system, and any plumbing going into the first-floor slab or basement floor, and then backfill dirt into the gap around the foundation wall.
6. Assemble the Frame, Walls, and Roof
With the foundation complete, framing carpenters will build out the shell of the house, including floors, walls, and the roof. Windows and exterior doors are installed, and the house is wrapped in a plastic sheathing that protects the interior from outside moisture while allowing water vapor from inside the home to escape.
7. Install Insulation, Complete Electric and Plumbing Installs
Now plumbers can install water supply lines and pipes to carry water through the floors and walls. Bathtubs and showers may be added at this time.
Electricians will wire the house for outlets, light fixtures, and major appliances. Ductwork and HVAC systems can be installed.
8. Hang Drywall and Install Interior Fixtures and Trim
With plumbing and electrical complete, the house can be insulated and drywall can be hung. A primary coat of paint goes on, and the house will start to look relatively finished.
Light fixtures and outlets can be installed, as can bathroom and kitchen fixtures, like sinks and toilets. Interior doors, baseboards, door casings, windowsills, cabinets, built-ins, and decorative trim go in. The final coat of paint is applied.
9. Install Exterior Fixtures
Crews begin exterior finishes like brick, stone, stucco or siding. Some builders pour the driveway when the foundation is completed, but many opt to do so toward home completion, along with walkways and patios.
10. Install the Flooring
Wood, ceramic tile, or vinyl floors and/or carpet can be installed at this point.
Recommended: First-Time Homebuyer Guide
Is It Cheaper to Buy or Build a New House?
There are so many variables that it’s hard to say.
The median sales price for new construction in April 2024 was $433,500, according to FRED, or Federal Reserve Economic Data. Can you beat that price with a DIY build? Maybe, if you act as the general contractor and choose cheaper materials.
Keep in mind that HomeAdvisor’s average of $313,884 to build a house does not include the land.
Ultimately, the price of your dream home hinges on location, the cost of labor and materials, and your taste.
3 Home Loan Tips
1. Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.
2. Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees.
3. Traditionally, mortgage lenders like to see a 20% down payment. But some lenders allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.
The Takeaway
Building your own home will allow you maximum flexibility in terms of your choices of everything from floorplan to finishes. But it is a complex process and you’ll want to take it step by step, with careful consideration of your budget and how you plan to finance what you build.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How long can you expect to live in a self-built home?
If a home is well built and maintained properly, you can expect it to last a lifetime.
How long will it take to build a home?
The average time it takes to build a home from start to finish is 9.4 months for a contractor build and 12 for an owner build, according to data collected by the U.S. Census Bureau.
Is it dangerous to build a home yourself?
If the question means completely DIY — clearing a lot, pouring a foundation, framing, installing electrical, and so on — the answer is “it sure could be.”
Are there safe financing options for self-build projects?
DIY builders and remodelers may use a construction loan, personal loan, home equity loan, or FHA one-time close loan. If you do use a construction-only loan, shop for a mortgage that makes sense once you stand there admiring the finished product.
Photo credit: iStock/Giselleflissak
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
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