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Is it better to build or buy an existing home?

My husband and I do not have enough money to put down 20%; therefore if we purchase an existing home, we will have to pay morgage insurance (approximately $80-$100 a month added to our principal payment and taxes and insursance.  We looked at a house with the asking price $161,500. We would need to complete some remodeling before we move in because it's outdated. We are thinking $15-$20,000 for the remodeling which we have saved in the bank. If we build the price would be $180,000.  Most likely we will not have to pay the morgage insurance because the bank will look at the appraised value of the home instead of the purchase price.  The difference in payment is $50 more a month if we build a new home.   
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August 07 2013 - Swink
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Answers (5)

If you have land sometimes you can use that as a down payment when building a new house.  If you are going to put money into updating and/or remodeling you might as well spend the estra money on getting a house built just the way you want.  Unless you are in a hurry to move it does take a lttle while to get a home built.  Then you have to see if you can afford the aminities that you want in the home.
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August 07 2013
Profile picture for wetdawgs
I'm not sure how the logic follows, but perhaps I'm not understanding all the details.

Are you building it yourself?   That means picking up the hammers, the paint brushes, etc.    If that is the case, you will need to get a construction loan after you purchase the land. 

Or, are you planning to buy "new construction" (i.e. a builder is building the home for you).  If this is the case missing piece of the logic you present is that the lender will look at the purchase price r when you purchase new construction, so unless you are putting down > $36,000 you will still have mortgage insurance.

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August 07 2013
No mater if you build or purchase exiting your lender is going to want to be protected so you will be liable for mortgage insurance.

Good Luck on your purchase.
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August 07 2013
If it's a difference of $50 per month difference, it makes more sense to go with new construction. 

Good luck!
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August 07 2013
If you can truly build a new home for that amount, I'd do that. You'll have all new systems in the home, it will more than likely come with a warranty. Plus you'd think if you were building it then maybe you'd get the builder to allow you to customize some of the finishes.

Jay Feaster
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August 07 2013
 
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