How Much Does It Cost to Build a House?

If you’re looking to buy a new home or even purchase your first home, then at some point, you’ll come across the classic homeowner conundrum.

couple looking at home plans

Should we buy a new home or just build our own?

There are a lot of advantages that come with building a home. When you build a home from the ground up, you get to choose the floor plan you want and design it, so it’s the best fit for your family.

You also may get a say in things like building materials, paint color, and appliances. But the downside is that it will take months to construct, whereas a new home is move-in ready immediately.

But the biggest thing that holds many people back from building a house is the price. Many people are under the impression that building a custom home is simply too expensive, and therefore, not feasible.

But is that true?

What does it cost to build a house?

Building a house can be pricey, but is it actually more expensive than buying a home in the current housing market? The truth is, it depends on a lot of different factors.

According to the National Association of Home Builders, it costs an average of $427,892 to build a 2,776 square foot, single-family home. That’s an average of around $154 per square foot. Here are some of the most significant cost factors you’ll need to think about when you’re building a house:

  • The lot you purchase
  • Foundation
  • Size of your home
  • Labor
  • Framing
  • Exterior
  • Interior
  • HVAC, plumbing, and electricity
  • Building permits
  • The final sales price

The Lot You Purchase

According to the NAHB, the average price for a finished lot is $91,996. But these costs can vary quite a bit depending on the size of the lot you buy and the local market you live in. For instance, purchasing a lot in a rural area will be less expensive, and you can get a lot more land for your money.


Once you’ve purchased the lot, you’ll need to pour the concrete foundation. According to the NAHB, this costs an average of $25,671. And the more materials you use, the quicker these costs will add up.

The Size of Your Home

This one is pretty self-explanatory; large houses cost more money than small houses. The bigger your home, the more the construction costs will add up. And a larger home will require more building materials, which will also increase the overall costs.


Labor costs account for about 40% of the total cost of building a house. Costs vary by region. Other factors that determine labor costs include the size and complexity of the house and the contractor’s buying power. Bigger homes, and homes that require more customization, will cost more than smaller homes because of the way they’re built.


According to the NAHB, framing is one of the most expensive parts of building your own home. On average, it costs $41,123 to frame the house. The only thing you’ll spend more on is the interior finishes!

During the framing process, the workers are essentially constructing the skeleton of your home. The workers will build the roof and necessary structures to support your home.


The exterior is the supporting structure that supports the roof and keeps you safe from seasonal changes. And the siding you choose for the exterior of your home will have a significant effect on price. For instance, a custom stone exterior will have a higher cost per square foot than vinyl siding.


You’ll be amazed at how expensive it is to purchase the interior of your home. The interior includes things like cabinets, doors, mirrors, countertops, lighting, and more.

When it comes to choosing your interior, opting for a lot of upgrades will increase the final price tag a lot. Pricey upgrades include things like marble or granite countertops, stainless steel appliances, or opting for hardwood floors instead of carpet.

These are all things that will make your home look nicer, and will even increase the value of your home. But it will add a considerable amount to the final price tag.

HVAC, Plumbing, and Electricity

If you want to actually be able to live in your home, then you’re going to need to install major systems like your HVAC, plumbing, and electricity. And needless to say, this is not the category where you want to try to cut costs.

Building Permits

To build a new house you’ll need a building permit. The average cost of a building permit is around $1,000 – $2,000. Costs can vary by location.

5 Steps to Begin Building a House

If you feel like building a new house could be the right choice for you, here are five steps you can take to get the home-building process started.

1. Come up with a budget.

You may feel ready to start designing your dream home, but it’s best to come up with a budget first. A budget will help you determine what you can actually afford, and it will make it easier once you begin working with the builder.

2. Get the financing straightened out.

Once you know what you can afford, it’s time to figure out your financing. Fortunately, financing a new home is fairly similar to taking out a mortgage on an existing home.

You’ll start by getting preapproved by a bank or lender. During the preapproval process, your lender will check your credit score and evaluate your assets and liabilities to determine what they’re willing to lend you.

3. Choose your lot.

Once you know your budget and have worked out the financing, it’s time to choose your lot. You can either purchase a lot in an existing neighborhood, or you can build land in an area that you plan to build on.

If you purchase land to build on, you’ll want to talk to the builder about any additional costs that come with this. These costs include things like leveling the ground or cutting down trees.

4. Choose your floor plan and design.

When you’re choosing your floor plan and design, you’ll consider things like how many bedrooms you want, and the overall layout of your home.

Most home builders will have predesigned house plans you can choose from. But if you’re looking for numerous customizations, it’s a good idea to work with an architect to create a housing design.

5. Stay involved in the process.

Unless you’re a contractor, you’re likely outsourcing the building of your home to someone else. But it’s still a good idea to be involved in the construction process.

Ask your builder to keep you in the loop, and provide opportunities to see the home during various building stages. These walk-throughs will give you a chance to ask questions and point out any problems that you see arising.

Is it cheaper to buy or build a house?

So, now that you understand how much it costs to build a house, and what goes into starting this process, is it cheaper to buy or build a home? The truth is, that depends on several factors.

The estimates will vary depending on what averages you’re looking at. And many of the home costs are entirely within your control.

For instance, you get to choose your own lot, the size of your home, and how much you spend on things like appliances. So, if you want to find ways to save on your building a home, you certainly can.

The most important thing to do is to consider your budget, and then what you’re hoping to get out of your home. If you know you can afford to build a house, and it’s worth it to you to pay for a custom design and floor plan, then it may not matter what the cheaper option is.

Bottom Line

Hopefully, this article has shown you that it’s entirely possible for you to build your own house. This is true even if you’re a first-time homebuyer.

To get started, you should carefully review your budget to determine what you can afford. Then it’s a good idea to get preapproved for financing with your lender. From there, you’ll be all set to begin working with a builder and start designing your dream home.

Jamie Johnson
Meet the author

Jamie Johnson is a freelance writer who has been featured in publications like InvestorPlace and GOBankingRates. She writes about various personal finance topics including student loans, credit cards, investing, building credit, and more.