Should You Build or Buy a House? Dave Ramsey Says to Consider These Pros and Cons to Help You Decide

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  • When you build a house, you don't have to compete with other buyers.
  • You can customize the property and won't have to worry about maintenance for a while.
  • There are downsides too, including delays and possible difficulties in negotiating prices with your builder. 

Becoming a homeowner is a major financial milestone, and there are different ways to achieve this goal. One option is to get a mortgage loan to build a brand new home of your own. The other is to get a mortgage and buy a home that is pre-existing. 

If you're trying to decide between these two different approaches, you may want to consider the pros and cons that finance expert Dave Ramsey has identified to help you make this choice.

The pros of building a home

According to Ramsey, the biggest benefits of building a home rather than buying include:

  • The ability to customize your property the way you'd like to
  • No competition since you're working with a builder to construct a new home rather than competing with buyers for an existing one
  • Little maintenance and low energy costs
  • The fact that your house is brand new

These are all indeed big benefits of homeownership -- but they aren't necessarily all created equal. Being able to customize your house is fun, but it can also mean you incur a lot of added costs -- or your customization efforts will be limited by your budget and what you can afford. If you buy an older home and remodel over time, on the other hand, you still get to customize your property. But you can do it as you get the cash, rather than paying a premium upfront for customization. 

The newness of the house is also a perk, but it also means the kinks haven't yet been worked out. Builders don't get everything perfect and there will inevitably be problems they have to come back to fix. This should be covered under warranty, but it can still be a pain. 

When you buy an existing house, you can identify the issues that exist before buying, during a home inspection, and make sure the sellers take care of them before you move in (or give you a credit to cover them). You can also get tax credits to upgrade older homes in many cases.

The cons of buying

Ramsey has also identified some big cons of buying a house. Here's what Ramsey says are the downsides:

  • A long delay until you're able to move in as the house is constructed
  • An inability to negotiate prices with a builder
  • The noise, mess, and stress of construction

Again, these cons make some sense, but it's important to think them through. Some builders will allow you to buy a new house that's being built and put the finishing touches on it, which can be a faster process that still provides more customization options (and the other benefits of a new build). 

You can also avoid the mess and stress if you have a place to live while construction is underway -- and you may be able to negotiate with a builder before you sign a construction contract especially if demand is slow, so Ramsey isn't necessarily right about this con.

Still, it's worth considering each of these pros and cons so you can make an informed choice. Building is definitely a fun prospect that allows you to make your home personal to you, but you can expect some added costs and time. You'll need to decide if those downsides are worth enduring.

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