Dave Ramsey Offers Straight Talk on One Key Debate Home Buyers Face

There are many key things to weigh when deciding to buy a home.

There seem to be pros and cons to every side of every debate.

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If you're not buying a brand new home, one question often is whether to buy a home an individual or a group of people are moving out of, or whether to build a home from the ground up.

Personal finance personality Dave Ramsey advises anyone pondering this dilemma to boil the thinking down to two things: money and time.

He cites a National Association of Home Builders paper published on Feb. 1, 2023, as saying the average cost of building a house in 2022 was $644,750.

He also mentions a National Association of Realtors conclusion that the average cost to buy an existing home was a bit more than $503,000.

The quick takeaway is that one could save oneself $141,000 by choosing to buy instead of build.

"Now, prices have gone up for both existing homes and new builds in the last couple of years," Ramsey wrote.  "But building a house is usually going to cost you more than buying one. And that makes sense, right? Buying something new (whether it’s a purse, a car or anything else) is almost always more expensive than buying something pre-owned."

"Think about what a pair of jeans from a thrift shop costs versus buying them new from a department store," he added, using a simple analogy. "That’s an extreme example, but still. You get the idea -- it’s cheaper to buy used."

Ramsey also addresses some frequently asked questions about building a house.

What is the most expensive part of building a house? Lots of things go into building a house. Some big expenses include laying the foundation, framing, plumbing, and finishing the interior. But your biggest expense might have nothing to do with construction -- it’s land! The median price for a lot is $55,000.4 But depending on the size of your lot and its location, you might spend over six figures for it.

Do I need a special type of loan for building a house? If you’re borrowing money to build your house, you’ll need to get what’s called a construction loan. This is a short-term, high-interest loan that allows you to draw out funds for each phase of construction -- site prep, framing, finishing, etc. Once the house is finished, most homeowners convert the loan into a home mortgage.

What are the hidden costs of building a house? When you’re building a house, you should expect some unexpected costs. Building permits could set you back a couple of thousand dollars. Or your builder might hit rock while digging your basement -- and that could add thousands of dollars in excavation costs. Raw materials also could jump in price. (Lumber prices have been especially crazy the last few years.) Whatever the case, make sure you have money in your budget for hidden and unexpected costs.

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