Buying a home during these challenging times

Home Ownership: To Build or Not to Build?

To build or buy a home

Arthur L. Rathell, III |
Posted on Jun 02, 2023

When you hear that residential mortgage rates are high, home inventories are low, and the average days homes are on the market is seven days, you may ask yourself, how can I purchase a home in this challenging environment?   

In April of 2023, both REDFIN and the Realtors Association of York and Adams County (RAYAC) reported the average number of days a house was on the market was seven to eight days and there was a decrease of approximately 30% in the total number of houses sold. The good news for buyers was the average sales price dropped from the low to mid $280’s to the low to mid $260’s. 

So, with the inventory of houses for sale at an all-time low, what are your options for home ownership?  In a seller’s market, it’s reasonable to consider building your own house, rather than fighting for an existing home. This option offers many benefits, including being able to choose a design, floorplan, energy-efficient appliances, and other features. In addition, it will be a new home with minimal maintenance issues to contend with for a longer period of time. 

Other considerations for building a home include the overall process from start to finish that on average may take up to one year. From finding land, working with a builder to design a home, and then the construction of it, this is a process that will take time and patience. 

Furthermore, if you own your current home – unless it is sold prior to closing on your construction loan – your current monthly financial responsibilities will be considered as part of your overall debt-to-income ratio and may limit the financing amount for which you get approved.    

If building a new home is a desirable option for you, start by researching what financing options are available from different lenders. Some have construction only loans that you will need to refinance to a permanent financing option when the home is completed. Other lenders offer a one time close, which automatically converts to permanent financing upon the completion of your home. With both options, there will be draws of funds based on the work that has been completed throughout the construction process, and you only pay interest on the total amount drawn. Once you convert to permanent financing, that is when you start paying your full monthly payments.

Upon finding a viable financing option that suits your needs, request a pre-approval for the loan from the lender, and then work on finding a builder. Start by researching how long local area builders have been in business, requesting references, and asking your friends, family and co-workers if they are familiar with the builders you are considering. 

Prepare in-depth questions in advance of meeting with the prospective builders. View these introductory meetings as an interview with a goal of finding the best builder to suit your family’s needs and expectations for adhering to your budget and timeline for completion. 

Additionally, you have options such as building a traditional stick-built home, which is a home constructed from the ground up on your building lot, or a modular home, which is a house built at a manufacturing plant and assembled on your lot. 

The best advice is to research all of your options for home ownership. Many people find that purchasing an existing home is still the best option for them, despite the low inventory and stiff competition. Others appreciate the process of finding a piece of land and building their dream home from the ground up. 

Take your time, seek out the expertise of the lenders, realtors and builders that take pride in their work, listen to your concerns and objectives, and are equipped to provide the best solutions to meet your unique needs. 

Like other community banks, ACNB Bank has a team of professionals ready to assist with the mortgage lending process when you are ready to take the important step of purchasing or building your new home. 

Ready to talk about buying or building a new home? We can help. MEET THE TEAM

 Arthur L. Rathell, III

Arthur L. Rathell, III
Senior Vice President/Residential Mortgage Manager (NMLS#: 783556) for ACNB Bank