Deciding where to live is a huge decision, there are countless factors to be taken into consideration. School districts, costs, housing associations, commute time. For this post, I am going to specifically talk about building a house vs buying an existing one. We saved THOUSANDS of dollars building our new home. If you want to know how to save money building a house of your own, this post is for you.
Housing costs are one of the biggest costs Americans face every year, make sure you consider the full monthly payment when deciding where to live. Banks will lend up to ~28 % of your gross income for a mortgage. While it is tempting to go up to the limit to tack on some extra square feet, you need to ask yourself:
Is where I live worth taking you that much of my income?
How we ended up Building a House over Buying
We made a few mistakes buying our first house, nothing major but the list of “projects” was so long we decided to sell instead of taking them on. After I added up the cost up upgrading a kitchen, bathrooms, adding central air and only have a single stall garage, we deemed it not worth the hassle and threw up the for sale sign.
As we were looking through existing homes, I saw a lot of the same projects. People do some crazy stuff to their homes, which is totally fine (no judgments!), until its time to try and sell your decisions to someone else.
After 8 houses in our price range were deemed “too much work” we decided to look into building our own house. We found a lot in our desired location at the higher end of our price range. After we met with the builder, we were sold on the idea and started planning. The big question was…
How to save money building a house?
Since we were close to the top end of our budget with the lot and model we wanted, finding some ways to save was crucial to getting all the upgrades we desired. Thankfully we were able to find a ton of ways to save some cash and it made a big difference on the bottom line.
I am going to walk through our experience step by step and give you some money saving tips and questions to ask along the way:
The Ultimate Guide: How to save money building a house
How to Save Money Building a House: Prioritization
The first, and most important, step to saving money through the building process is prioritization.
There are going to literally be 1000’s of decisions that can impact your cost as you go through the process. Sit down and make a list of what you value, or your “Must-Haves”
Think about the homes you have lived in before. What did you love? What would you change? Did you enjoy taking care of that size of yard? Did you have enough bathrooms or space in your laundry room? Are you planning to have kids?
The questions are endless, but thinking through this can save a ton of time, money and reduce the chance of future disappointment.
How to Save Money Building a House – Choose a Reasonable Location
This step is very similar to selecting a pre-existing house. Lots should come up in the same search tools you would use to find existing homes as long as you have them toggled to show them. Sometimes just the development will show up and you will need to meet with the builder to see the lot and prices available.
Lot size or location within the same development can cost more if they are in a more desirable part of the neighborhood (a lot on a dead end road might cost more than one border a busier street for example).
When choosing your location, keep your commute to work in mind, that was a huge factor in where we decided to build. It is a big time and money decision that you are stuck with unless you want to move again.
Select a Builder and Model
This is one of the most important steps, run through everything in this section before making a decision.
Most new developments have a pool of a few builders that own lots. Walk through their models and keep in mind that you may have to drive to another development to walk through multiple model options. Run your builder through the below set of questions before making a decision.
Questions for your builder at this step:
Are you able to work on the house yourself and get credit/cash back?
If I could pick one “How to save money building a house” tip to give, this would be it. We were actually cut a check at closing because of all the work we did ourselves.
We did all the tile floors, landscaping and wood floors in our house. This is the time to track down friends and family and put their special skills to work. This is where we were able to save a significant amount of money ($3,000 on landscaping alone)
Laying sod is crazy easy (green side up), a case of beer and a few pizzas saved us a lot of money in labor!
What are the “standard” finishes, flooring, etc?
Model homes often have upgrades, ask what costs extra when you are walking through and take notes. Our notes actually saved us later when our building tried to charge for something that was included in the base price.
Example of the upgrades we were offered:
- 3rd Garage Stall
- Upgraded cabinets
- Concrete Driveway (over blacktop)
- Wider front porch (so you could fit furniture there)
- Furnace/AC Unit
After you find out what is standard and what is an upgrade, get a list of cost for each and review them before making a decision. Focus on what you actually value, maybe you upgrade the kitchen countertops but leave the bathrooms as is or get the third garage stall and skip the wide front porch. Don’t get pressured into a decision, but you don’t want to regret not adding something and it will be more expensive to do later.
What are the timelines?
Planning move out/move in dates is difficult, get a timeline in writing or you might end up paying for extra storage or rent at current residence. communicate often with your builder as the project progresses.
How do they do Financing?
Builders may finance the construction themselves or you will have to get a construction loan. We saved a ton of money by having our builder pay for the construction loan closing and all the interest on the loan during construction. I would look for a builder that can make that type of an arrangement
Is the development part of a Housing Association? If so it could cost a significant amount of money every quarter or month. Make sure you get the necessary information from your builder. We pay about $170 per quarter for garbage, park maintenance, and snow plowing the roads (not driveways).
Make sure to ask about the rules for your neighborhood, some housing associations have strict rules on what you can and cannot build/do to your property. An example is we have very strict fencing rules which drove the cost of materials up.
For long-term savings, it is worth spending money on efficient appliances/bulbs.
Very strict energy rules went into effect in Minnesota so we were “forced” to upgrade insulation and certain appliances, but I am very happy we did it because our energy bills are significantly lower than our previous home. I wish we would have fully insulated our garage now to help save even more on our monthly bills.
Check out the laws in your state and make adjustments to insulation levels, appliances, light bulbs, etc, to keep costs down. There also may be tax credits for buying energy efficient appliances, adding insulation or even using solar panels (something I wish I would have looked into).
It may make sense to upgrade large appliances now, the best example I can think of is upgrading your furnace. For a few hundred dollars up front, you can save every year moving forward. LED lights seem expensive up front but are worth the cost.
Allowances for Appliances?
It is common for builders to use allowances in the purchase price, if you go over them it adds to the cost. Our builder’s appliance allowance was enough to get the base model set at a local appliance store. We decide to upgrade a few items and it bumped up the purchase price.
We didn’t use the showroom the builder recommended either, it was overpriced and we were able to find a great deal shopping around for one at big box stores.
Can you supply your own materials?
Comes in play when you are selecting appliances, lighting or any work you are doing yourself. We saved a few hundred dollars easily by picking our own lighting up instead of using the studio our builder recommended.
Selections and Upgrades
This is the most exciting and potentially costly step. Most builders give you a base price that includes an allowance for appliances and lighting fixtures. They will give you a list of places they work with and encourage you to use their suppliers. Compare their costs to big box stores or Amazon, we foung the showroom to be way more expensive.
A lot of the questions from the previous step come into play here. When you meet with your builder or representative, be upfront about your budget for each area of the house. Always ask for the price before making a selection, the last thing you want to do is fall in love with something before knowing the price.
Few things we learned in this step:
- You can upgrade your upgrade: We decided to install granite countertops (I know, I know), we don’t have that much counter space so the price was reasonable. When we went to the granite place to select our slab, we quickly found out that the price we were quoted was for the very basic patterns. There were only a few to select from in our range, and we ended up spending way more on a slab we liked.
- Showroom Lighting is Insane: Our lighting allowance would have covered 1/3 of our fixtures if we bought them all at the showroom. We made a trip to Menards/Ikea and bought all of our exterior, closet, laundry, and hallway lights for 1/3 the cheapest showroom price.
Negotiation and Material Swapping
One way to save money building a house is to negotiate up front on the price of your house or work in a few free upgrades before you sign the dotted line. If the builder is motivated (or the salesperson wants to close a sale) you can save yourself some serious cash. I have also heard of people bundling 2 or 3 major upgrades together and asking for a discount to save a little bit.
One thing to watch out for when you are making changes to the standard layouts or materials that are included in the base price of your home is the original cost comes off when you change it out for something more expensive. If you upgrade to granite countertops, the builder should take the base materials off or only charge you the delta between the two options.
Cash flowing upgrades and materials you buy yourself
Perhaps the biggest cost of owning a home is the interest paid on your mortgage, the less you take out, the less you will pay in over time. One way you can save money building a house is finding ways to cash flow the cost of some upgrades. It is way easier just to tack everything on to your mortgage, but the long-term cost of a few thousand dollars here and there is significant. You don’t need to do this for everyone obviously, but finding a few things to pay for out of pocket makes a difference.
Watch and Monitor
You should be provided with a construction schedule, watch it closely and hold your builder accountable. If your builder is behind schedule, you might need to find a place to live. For people currently renting or if you have a deadline to be out of your current residence, it will cost you more money to bridge the gap.
If you see something you don’t like or don’t understand. Ask! We caught a few things throughout the building process and were able to change them without incurring costs. The last thing you want is re-work because you misunderstood something in the pre-build meetings.
Thankfully our house was on the way home from the park and ride we use to get to work. We stopped out every few days and checked on the progress. It was very interesting to watch the building process unfold. We also got to do our own mini-quality assurance as the building went up.
Planning For Future Updates/Changes
Just as much money can be saved in the years after building if you want to make changes. Planning ahead is a great way to save money building a house
Here are some things to think about:
- Basement Bathroom – We had a bathroom “roughed in” the basement. When we decided to finish the basement all the plumbing is complete. No concrete saws! Will save some money, time and dust when we finish it.
- Sprinkler System – We had the plumbing inside the house done to prepare for a sprinkler system. Saved us $400-600 when we decide to put one in.
- Tech Tubing – Figure out where your TVs are going to go and have them install tech tubing. It was really cheap to do before the walls go up. If you are not familiar with tech tubing, it allows you to run all of your TV cords inside the wall out of sight.
- Laundry – Put it close to the bedrooms, save yourself a flight of stairs. Keeps our main level laundry free
- Wiring and HVAC- If you plan to finish your basement in the future have them at least pull the wires and Install base HVAC to the area ahead of time. It will cost significantly less than having someone come to do it later.
- Patio – If you plan on adding a concrete patio, do it before the grass or fence goes in. Saves you some yard work and will likely be cheaper if the company can get the cement/bobcat in the yard easily.
Check if the below items on this are list is included in your purchase price (if they aren’t prepared to pay out of pocket after closing).
- Mailbox – Fairly cheap and easy to install yourself.
- Window Treatment – Amazon has awesome custom cut blinds that are easy to install
- Garage Door Openers – Can save by shopping around at online and big-box retailers. Check to see if your builder can get a deal.
- Mirrors (yes I know of someone who had to buy bathroom mirrors after construction was completed)
- Fencing (Highly doubt this would be included, but it is worth checking on)
Benefits of Building a House
You can save a lot of money building a house if you compare it against the costs of upgrading an existing home to your liking, paying to replace old appliances or even in your time (no projects, am I right?).
Here are some of the main benefits:
- Brand new appliances
- Energy Efficiency
- Fewer Projects for you to do after you move in
- Custom Design/Paint Colors/Exterior Finishes
Building a house made a lot of sense for us, if you can build within your budget I would strongly consider it as an option. The upfront stress of going through the process melted away as soon as we moved in. Please let me know if you have any more questions – I tried to cover everything but there is a lot to consider. I have been through this process a few times (once with my parents) and am a pro!
Update 1 year later – How to save money building a house:
Notes on year 1:
Does your builder do a 1-year review? If not you should ask for one. If they do here is a list of things to check
- “Screw Pops” – will be able to see screws through the sheetrock if it happens
- Do all the doors/windows open and close easily
- Get a refresher on maintenance for any appliances you aren’t that familiar with (Air Exchanger/Fireplace/Furnace/etc)
- Did anything stop working (Outlet/Light switches/etc)
Not a whole lot else to update after 1 year. The biggest issue was tightening up some door knobs.
Update 2 years later – How to save money building a house:
There are a few things I wish we would have done differently when we went through the building/selection process:
- Would have had the electrical and HVAC ran in our basement so we didn’t have to bring someone out to do it when we were finishing our basement.
- Insulated our garage so we could add a heater without having to take down drywall or figure out a way to insulate
- Glad we saved our paint, worked well with the touch-ups I did this year
- Added a water softener right away, we waited a year and it was totally worth installing.
- Adding the fireplace upgrade was 100% worth it.
- Would have asked to put the electrical box in the basement instead of the garage
Update 3 years later – How to save money building a house:
Some updates after another year
- Would have been a little more selective in our bathroom lighting fixture choices. The Fancy LED bulbs are crazy expensive
- This is kind of weird, but I would have made sure our stairway openings were built in a way to easily add a baby gate. One of them is a weird shape and it is a PITA to use a gate there
- I would have paid to have some extra black dirt brought in prior to the sod. There was some, but some parts of my yards are hard to keep green through the summer.
- Wish we had a bigger foyer type area coming in from the garage. Now that we have kids it would be nice to have space for all their stuff to hang.
- Would have explored adding a permanent humidifier. House gets super dry in the winter
- Would have added a WiFi thermostat right away, ended up replacing the existing a few years later.
Overall, after 3 years, we are still happy with our decision to build instead of buy.
Have you built a house of your own? Do you have any tips on how to save money building a house?