Published: Jan 20, 2021 | Updated: Jan 20, 2021

Navigating Building on Your Own Land

So you're thinking about buying land to build a house on? We'd be glad to walk you through the process to help you prepare!

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Buying land to build a house can be a fantastic decision. But it is one that you’ll want to research a bit before taking the plunge to start working on your dream home. If you are building a home, you can’t get a traditional mortgage. You’ll need to get a different type of loan until the home is finished and you can get a permanent mortgage.

How to Buy Land and Build a House

Generally, building a house on land you previously bought involves some basic steps. For 10 great reasons to buy a lot first and then build a home, check out this post.

1. Find the piece of land you want to buy.

  • Through a trusted, experienced real estate agent.
  • Through your home builder.
  • On your own.

2. Move forward with the land purchase process.

Acquire a construction loan through a bank or mortgage company.

  • A construction-only loan provides a one year, higher interest rate loan that gives you time to build a house and purchase your real estate.
  • You receive advances during the construction process to pay only what you need at that time for the next part of construction for purchasing construction materials and labor. 

Secure a land loan.

  • A raw land loan is for completely undeveloped land, which may be more difficult to finance.
  • An unimproved land loan is for land that may have some utilities but still needs meters for gas or electricity and a phone box.
  • An improved land loan is for a lot that has access to a road and utilities.

Or choose a construction-to-permanent-loan

  • This type of loan allows you to borrow to pay for building your home, then the loan converts to a permanent mortgage or end loan (a 15-year or 30-year fixed-rate mortgage).
  • It is a way to have a single close with only one time to pay closing costs, which reduces your total fees.

Buy the lot with cash.

Choose seller financing, if it is an option.

3. Choose your custom home builder carefully.

  • For 6 reasons to choose a custom home builder, please read this.

4. Decide on your home design and floor plan.

  • Hire your own architect.
  • Choose from available house plans from your builder.
  • Design the home yourself.

6. Begin construction.

  • To see the factors that affect a new home’s build time, please read this post.
  • For the steps in building a house and a description of the building process, please click here.

7. Prepare your belongings to move and sell your old home.

  • Secure a rental home or apartment if needed

8. When construction is complete, switch to a mortgage loan.

  • If you had a single close loan, you are already set!

The process is not complicated if you have a trusted realtor, lending company, and/or home builder walking beside you to guide you on the right path.

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How Much to Build a House on My Land?

If you choose to build a home in a subdivision, the land has likely already been prepared. The utilities are already available. The road is already constructed. Of course, these costs impact the price of your lot. 

If you choose to build a home in an undeveloped rural area, don’t forget to calculate all of the extra costs of preparing the lot and getting things ready for home construction.

The cost to build a house on your own land depends on a variety of factors including:

  • How many square feet will the custom home you want to build need?
  • Are you buying land with utilities or without? If it is raw land, consider the cost of hooking up utilities. The expense can easily run from $10,000 to $30,000 or more, depending on the distance from your lot to existing utilities. Be sure to check on the exact distance and pricing for your utility hook up including electricity, natural gas, water, and sewer lines. Ask your local services or a local contractor for an estimate.
  • If you aren’t close to water and sewer utilities, investigate the cost of drilling and maintaining a well before purchasing the land and ensure the lot can support a septic system. A well can cost anywhere from $2,000 to $25,000 depending on the depth required. A septic tank will likely cost less per month to operate than public sewer service fees, but the installation may cost $3,000 to $20,000.
  • If you are buying developed land, keep in mind that there will still be tap fees for your phone, cable, power, gas, sewer, and water. In addition, there will be the cost per square foot of extending the lines from the road to your home.
  • Be sure to inquire about all the permits and fees your jurisdiction will require. They can also add up.
  • How much work needs to be done to prepare the land for building and do your lot prep? Will you need surveying, tree removal, grading, and drainage solutions?
  • How large of a driveway will you need and what type of driveway do you want?
  • How much will the house, itself, cost?
  • Will you want landscaping done? To what extent?
  • Will you be installing an in-ground pool or other amenities?

For the best estimate about how much your home will cost to build, check with your home builder for a ballpark figure before getting started. Once you know what lot you are using and you have the home design ready, you can get a very precise figure.

Additional costs to consider when building a home:

  • Closing costs generally run 2-5% of the total home and land cost.
  • Real estate commission is usually 6% of the land price.
  • Property taxes cost, on average, over $3,000 per year.
  • Homeowner’s insurance costs about $400-$3,000 per year, on average, according to Valuepenguin.com.
  • Home owner’s association fees may cost $100-$3000 per month with an average of about $200 per month according to Smartasset.com.

Building a home is an exciting process that allows you to have control over the location of your home and the finished product. In the end, what matters is that you have a home you love in the perfect location for you and your family. We’re here to help you find your happily-ever-after home.

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Are you ready for building a home on your land in the Lexington, SC area? 

At Blythe Building Company, we’d love to help you get your dreams off the ground. We are a luxury home builder with many years of experience in the Greater Columbia area.

Please contact us today to get started building your dream home!

We build in areas of the Midlands of South Carolina like Lake Carolina, Forest Acres, Arcadia Lakes, Pine Ridge, West Columbia, Ballentine, Chapin, Lexington, Irmo, Lake Murray, and more.

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