One-Time Close Construction to Permanent

Just like buying an existing home isn’t as simple as throwing down a bag of cash, building isn’t as simple as buying a truckload of 2x4s and pouring some concrete. Unless you’re paying all cash for the construction, you’re going to need a loan—not just for the construction and the labor, but for the land itself.

One-time close loans are a convenient option that allow you to pay for the land and labor with one package. Otherwise, you’ll be looking at two separate mortgages for the land and the construction itself. That means two applications, two underwriting processes, and two closings. Never mind the two payments part of it. 

The process of building a home is also a lot more involved than simply buying one. Here’s a quick look at it:

1. Buying the lot
2. Get the plans
3. Hire a team
4. Obtain permits
5. Start construction
6. Continue construction
7. Inspections, inspections, inspections
8. Closing

While building a house might be a little (or a lot) more complicated than buying a house, it comes with its own set of benefits. For starters, what’s not to love about whole-home customization? We’re talking location, layout, lighting, flooring, fixture finishes, equipment…everything. With that customization, you get access to new options for energy efficiency, meaning your new construction home can help you save on bills while saving a little bit of the environment. And, because you’re building from the ground up, you face little to no competition. 

Downside? The COVID-19 pandemic continues to have lasting impacts on the industry, meaning lead times are longer and materials are more expensive. Now, speaking of expenses…

Details vary, but Architectural Digest reports that building a house can cost anywhere from $500 to $1,000 per square foot depending on location. Meanwhile, American Home Shield's 2022 American Home Size Index shows that the average size of a house in the United States is roughly 2,500 square feet. 

Crunching the numbers shows us that building a house that size can cost anywhere from $1.2 to $2.5 million—averaging out to $1.875 million. 

If that number caused your jaw to drop, take this bit of solace: Other Resources pin the average cost of a custom, similarly sized home at roughly $500,000—just a little north of the average “sold” price of a home in 2022. 

What’s it all come down to? When building a house, your location, equipment, and finishing touches will push your costs up or down. The safe bet is to budget for more than you initially expected, or were quoted for.

Regardless of whether you choose to build a house or buy one, please remember one thing: Property Taxes. You’re going to pay them either way, but property taxes on new construction and custom homes are often higher than those for existing homes—even remodeled ones. Again, it’ll come down to your budget, and your budget should include estimates for property taxes. 

And hey, if you choose to borrow from The Grigg Team at Cardinal Financial, we’ll help you prepare those estimates either way.