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Constructing a home

Posted on Monday, January 24, 2022 in Mortgage Lending

Should You Build or Buy a House in 2022?

Due to the tight housing market, many people are considering building a home rather than buying one. But, is it less expensive to build or buy a house?

The average cost per square foot to build a house in Iowa is between $100 and $155, according to the National Association of Home Builders. Therefore, the cost to build a 1,526 square foot home would be between $152,600 and $236,530, including permits, inspections, excavation, and other costs. This cost excludes the price of the lot on which your house would be built.

According to, the current median listing price for a home in Iowa, is $173,300 for a 1,526 square feet home.

So, if you add the expense of a lot onto the building costs in this comparison, there may be little difference between buying and building.

Factors that can impact costs

There are several variables that could contribute to a noticeable price difference when building  your own home – taste and design of your home, location (community and neighborhood), demand for labor and materials, whether you need to hire an architect or will be using the builder's plans, utility access (does the lot need installation of standard city utilities or require a well and septic system), and building codes and standards.

The biggest drawbacks to building a house tend to be the timeframe to find a lot and then construct your home, and potential cost overruns. To help avoid unexpected price increases, try to get a lump-sum contract, rather than a cost-plus contract. A lump-sum contract specifies a fixed construction price, putting the risk of cost overruns on the builder instead of the buyer.

You would still be responsible as the homeowner to pay for costs associated with change orders. For instance, if you want to upgrade your cabinet materials from the original plans, you would be responsible for the price difference.

The bottom line

Even if you begin your home search set on finding an existing home, you may change your mind if you can’t find exactly what you want. Or, conversely, you may decide that purchasing an existing home is a better option for you rather than waiting to build a home.

In either case, working with an experienced, local mortgage lender can help you make the buying or construction process go as smooth as possible. 

Learn about your options for construction and residential mortgage loans. Start here.

  1. construction loan
  2. first national bank
  3. home buying
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