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How Much Does it Cost to Build a House?

Purchasing a house is a huge commitment and as a prospective homeowner, if you’re going to make that commitment, of course you want to find a house that embodies all your wants and needs. Many future homeowners are now realizing that to get the house of their dreams they may have to build it themselves.

Moreover, others may have inherited land or purchased property without preexisting structures and would like to make that their new homestead. Therefore, one of the first questions eventual homeowners will ask themselves is, how much will it cost to build a house? The simplest answer is, it really depends.

In this article we will delve into the many factors and options available to prospective homeowners looking to build, because this question contains so many variables. We must look at factors such as, specific type, size or quality level of the home, and specific location amongst others.

Many people believe the rule of thumb is that buying a new home from a builder might run you 15 to 30 percent more than buying a similar older home in an existing neighborhood. Yet, in September 2014, the National Association of Home Builders (NAHB) reported that the median price of an existing home was $210,300 while the median price of a new home was $259,000.

According to HomeAdvisor the average national cost to building a house, based on 175 cost profiles was $304, 268. This puts a 2,000 square foot home at about $150 per square foot.Most homeowners spent between $177,402 to $462,038, so let’s examine the variables involved, which causes such a range in price.

Custom Home Building

Of course one of the biggest advantages of building your home from scratch is being able to customize it completely. Custom home building affords you unlimited control but the more custom your house is the higher the price will go.

Additionally, this option may take longer in terms of overall planning, design and construction time. When it comes to a true custom home, it may take up to a year and requires extensive involvement from the buyer in selecting design and product options, site visits and home walk-through.

Construction of a full custom house usually involves the cost of an architect, as well as the expenses of a construction loan, permits, impact fees, site preparation, utility connections, sidewalks, driveways and possible well or septic field.Residential architect fees can be quite costly, ranging between 5 percent and 15 percent of construction costs for a new home.

Nonetheless, not all custom homes are designed by an architect. Home design companies can also create custom plans. Their costs typically range from $1.50 per square foot to more than $2.50 per square foot for the total project and size of the house. Opting for custom plans through a home design company may be a budget-friendly option for smaller homes, but for bigger homes, this can be a substantial budget item.

Construction of a custom home typically runs from $200 to $400 per square foot and all things being equal, it commonly costs 20 to 30 percent more for a custom home than for a new production home, according to Ed Hudson, director of Marketing Research for the Home Innovation Research Labs, a subsidiary of NAHB.

Working with Production Builders

Similar to fully customized homes, the cost per square foot of a personalized production home can vary greatly depending on the home’s features.The average cost per square foot of a production home can range from $75 to $115 or more depending on the building company, quality of materials and location.

Depending on your budget a production home can have a considerable amount of customization. Changes can be as major as resizing, adding or removing rooms, or as simple as selecting multiple interior and exterior finishes.

There are many cost advantages to production homes. One, you won’t be paying separate costs for the land and the home. Two, the building permit and all fees are paid by the builder and included in the cost. Three, production homebuilders offer many floor plan options so there is no extra cost for plans or architects.

In addition, there is much less risk of surprises or design problems, that often occur with custom homes because the production builders have built each floor plan many times over.

Another advantage is that all of the planning has been done in advance as production builders modify their floor plans to meet building codes for each region and neighborhood they build in. These types of homes generally appraise at or above the offered price to match comparable homes in the area.

Lastly you can cut down on costs by finding a company that has a development in progress. By obtaining one of their properties before or during construction you can increase savings; but to take full advantage of these savings any changes must be minimal.

Overall, the cost of a production built home can come in around 15 percent less than a fully custom built house, which in some cases is on par with modular homes.

Modular Homes

Modular homes have come a long way in recent years and many architects specialize in designing these homes. Modular homes now have a spectacular array of customization options, offering homeowners an enormous variety of floor plans and added features. Modular homes are also available in any size from cottages to luxury mansions.

A prefabricated home can range in price from around $50,000 to over $300,000. It is important to note, electrical, plumbing and ductwork are often not factored into the initial pricing. Just like with a fully custom built home you may also need to install a septic system, natural gas or a basement, which will add to the price. Your final cost may be 20 percent more than the builder’s quote.

Another important factor is that the builder must be paid in full before the process has been completed or sometimes before it has even begun. These initial fees can often deter potential buyers, but one way to help is by getting a special construction loan. This loan lasts for one year and once the building is completed, the dealer will pay off the loan and a regular mortgage will be issued. Therefore, it is important to shop around and know your budget.

Still, these types of homes are typically cheaper than 100 percent custom-built houses. Since they are constructed in a factory there are no weather delays and they can be built in a matter of weeks, as opposed to months. The shorter build time will save you money on the overall construction.

Furthermore, all inspections are performed at the factory by a third-party inspector during each phase of construction and don’t require further on-site inspections.

Another attractive feature of a modular home is that they are much more energy-efficient, substantially reducing your monthly expenses. They are also environmentally friendly and as with any house, modular homes can be expanded.

Aspects that Affect Cost

As we’ve seen above there are many options when it comes to building your own home and various factors that influence the bottom line. Below is a list that breaks down the components of building your home that will add to the cost; from customization to basic construction rates.

  • Size and number of stories: An obvious factor. The bigger the home the more it will tend to cost. If you would like to include a basement or attic space, this too can increase the building costs. Adding a finished basement or attic as opposed to one roughed in to the structure will also drive up the price.
  • Shape of Building: The more corners or oddly shaped rooms you would like in your house, the more it will ultimately cost.
  • Type of Roof: The most important element to a roof is durability. However, if you decide to increase the roof pitch and area of the roof, or use specialty materials like tiling, more resources will be needed and the cost will go up.
  • Fixtures/Finishes: This is another component of building a house that can increase price. Opting for a granite counter top in the kitchen or an Italian marble tile in the hallway can add luxury to any home but it will likewise add up on the final bill. Finishes like oil rubbed bronze over satin nickel, can also add to the costs of construction. A good idea here is to think about which rooms you use most in the house. If you love to cook then opting for a luxury or custom grade of fixture/finish in the kitchen may be a good option. To offset this cost choose a standard grade fixture in other, less used rooms.
  • Appliances: Most major appliances in the home have a considerable price range. For example, a refrigerator can easily range from $600 to $2,800, depending on model, size, and features. It is important to remember this from the start of the project so you can budget for the desired quality of appliance. Think about investing in the most energy efficient appliances possible, as the savings on the long-term cost of the utility bill can offset some of the initial price.
  • Design Features: When it comes to adding extra features to your home, it’s best to examine what will add re-sale value. Even though the idea of having your own swimming pool may sound like a dream come true, it is one of the most costly additions to any property and actually negatively affects your resale value. Potential buyers don’t want the additional required maintenance or liability associating with drowning. Instead you may want to opt for a hot tub, a less versatile water feature, but one that can be budgeted more easily.


In sum, how much it costs to build a house depends on you! Where would you like to live? What style of house would you like to build? How big will this house be? Will it have multiple floors? What finishes, fixtures and extra features would you like to add? Would you like to custom build the whole thing or make changes to production built or modular homes?

The best way to be sure that your homebuilding budget makes sense is to identify and price every element that will be used to build your home, including all of the associated subcontracts and labor costs. A sensible approach to determining how much your new house will cost is to work backwards. Start by figuring out how much you can afford to spend, then be realistic about the size of the house you need, and what and where you can afford to build.

Using the internet can really help you out at this stage of the game. From financial resources that will help you learn more about mortgages and calculate monthly payments for a given loan, to web-based calculators that can help you make rough cost calculations. For instance, is an easy-to-use, free calculator that adjusts for the quality levels of finishes and fixtures, as well as location, down to the city level.

Once you have a good idea of your budget look in the real estate section of your local newspaper, or online, for homes in your price-range. The advertisements will often provide you with prices and square foot descriptions allowing you to get a price per square foot. Then tour model homes to see room sizes, types of finishes, and the quality of workmanship that you can expect in that price-range. Make sure to record what you like and what you don't like about the homes you will be visiting. Keep in mind that a lot of what you may see in model homes isn’t often included in the price of the "standard model".

Another good idea is to check with local mortgage brokers, real estate agents, or friends who have recently built a new home to see what type of ballpark numbers they can give you. Be sure to take the time to review your finances, prepare a reasonable budget, and produce an accurate construction estimate for the specific home that you want to build.

Interview at least three contractors, review their work, call their references and check their licenses.Once you've found a contractor you like and trust, work together with your preliminary budget to include the must-haves and eliminate unnecessary extras as money allows.

Be sure to keep a safety net of at least 10 to 20 percent of the total project cost to cover last-minute changes, delays or other unforeseen issues; for example, an increased cost in lumber mid-project.

Although most people think that building a new home will cost more than an existing home. The price difference doesn’t have to be exorbitant and the benefits of building or purchasing a brand new home are numerous. By building your own home you get a state of the art house, designed with your needs in mind and don’t have to worry about major repairs to roofing, appliances, fixtures, pumps, furnaces or air conditioners. So, regardless of the price difference and commitment required, new homes can be of superior value.


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