Buying land and building a house gives you much more flexibility than purchasing an existing property. However, the process is also more complicated, so knowing what you're getting into is important.
Here is a step-by-step guide to buying land to build a house.
1. Find land for sale
Browse websites
Most home-buying websites let you search for building lots, but you should also check out listing services specializing in vacant land. Some of our top picks include:
Work with a real estate agent
It’s also a good idea to work with a local real estate agent, who can send you automatic alerts when the right property hits the multiple listing service (MLS). Seek real estate agents specializing in new home construction and land deals.
Martin Boonzaayer, CEO of The Trusted Home Buyer, says, “When you're looking for land to build your dream home, a real estate agent specializing in land can be a game-changer.” Real estate agents specializing in land deals often have access to off-market listings and have knowledge of local zoning restrictions that will determine what and where you can build.
When looking for an agent, you should ask prospective agents about their experience in land deals. Boonzaayer says that “A good real estate agent is like your guide through this maze—they bring expertise, connections, and peace of mind to ensure you make the best decision for your future home.”
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2. Check if you can build on the land
See if there are any zoning restrictions
You can find out if there are any zoning restrictions on a piece of land by contacting your local zoning office and providing them with the address. Alternatively, you may be able to look up your address on the local county assessor zoning map.
Purchasing a plot of land with zoning restrictions can quickly kill any custom home building plans you have. You’ll want to double-check that your land is an approved building site for residential purposes. Even if your land is approved for residential construction, there may be limits on the type or size of the residence you can build, such as a prohibition against mobile homes.
If you aren't sure what questions to ask, contact an experienced real estate agent knowledgeable about vacant land. They'll be able to guide you through the process and help you find any information that may negatively impact the land's possible usage and value.
Find out if there are existing utilities or if you'll need to add them
Utilities such as water, electricity, sewer, and natural gas are necessary for residential properties. Water and sewers are usually managed by the county, while electricity and natural gas may be managed by private utility companies. If you would prefer a more rural setting for your land build, you will have to find out whether existing utilities are in place.
To find out if you have water and sewer connections, you’ll need to contact the county’s planning or zoning office. Power and gas can be a bit more complicated since you’ll need to find out which (if any) private power or gas companies service the area. You can ask your local planning or zoning office which gas and electricity companies cover the county, and then contact those companies directly.
A real estate agent can assist you with utilities. Boonzaayer says, “Your agent can help you determine if the land has access to water, sewer, electricity, and gas. This is crucial because it affects what you can do with the land. If services aren't readily available, they can advise on alternatives like wells or septic systems.”
Hire professionals to review the land
When buying land, you should hire the following professionals to ensure a smooth transaction:
- Surveyor: To map your land and check for potential issues, like boundary disputes. A survey is essential for knowing exactly what land you’re buying and avoiding unwanted surprises.
- Appraiser: To determine the value of your land by comparing it to similar properties in the area. An appraisal is necessary for getting a mortgage and ensuring you don’t overpay on your purchase.
- Environmental consultant: Perform environmental due diligence, checking for contamination risks, soil quality, and protected areas like wetlands. This is necessary to ensure that your land is suitable for building and can help you avoid liability issues.
Most mortgage lenders require a land survey, appraisal, and environmental due diligence when purchasing land. Even if you’re not applying for a mortgage, you’ll still need at least a survey of the land to comply with local and state laws before building.
These professionals also protect you even if they’re not strictly required by your lender or local government. For example, if an environmental consultant finds that the land is contaminated, the seller will be liable for cleaning it up and not you, so long as the environmental due diligence is performed before the sale.
Consider whether the location aligns with your lifestyle
When considering lots to buy, you’ll want to ensure that the location and available services align with your desired lifestyle.
- Privacy and noise: If you’re looking for a private and quiet spot, a rural property will be ideal, although that may mean you'll have to pay extra for utility hookups.
- Home-based businesses and farms: Builders who plan to run a home-based business or farm should check that local ordinances and (if applicable) HOA rules permit them.
- Future changes: If you’re planning on having a growing family or simply just expanding your house in the future, a lot with extra land will be suitable. However, check to find out if any local zoning laws restrict how big your house can grow to or whether you’re allowed a maximum number of structures.
- Proximity to amenities: Rural living can be idyllic, but be prepared to sacrifice proximity to schools, hospitals, highways, and other amenities.
3. Get financing
When you buy land to build a house, the financing process is different from buying a traditional home — especially if the land is completely undeveloped and lacking any utilities.
Here are some of your financing options:
New construction loan
A new construction loan allows you to finance both your land purchase and the cost of building your home. These loans often convert to permanent mortgages once the construction is complete.
The main benefit to a construction loan is that your lender will likely require a smaller down payment than if you were financing the lot and construction separately. Lenders generally require 10-20% down on construction loans. Some banks and credit unions offer even lower minimum down payments if you're willing to pay a higher interest rate.
However, lenders typically have strict requirements for new construction loans. To qualify, you'll need excellent credit, a low debt-to-income (DTI) ratio, and detailed architectural plans.
Lot land loan
If you don't qualify for a construction loan or don't have a firm building timeline, you may have to finance your land purchase and construction separately. Lot land loans allow you to finance land that is already prepared for residential development.
In general, a building lot qualifies for a lot land loan if it has the following in place:
- Appropriate zoning
- Building permit (if required by lender)
- Access to a public road
- Utilities nearby (including sewer access or on-site septic system)
Down payments for lot land loans are usually similar to new construction loans, so you can expect to put 10-20% down.
Raw land loan
If your desired building lot doesn't qualify for a lot land loan, you may need to pursue a raw land loan.
Land loans can be extremely challenging to obtain, as lenders consider them risky.
When underwriting raw land loans, lenders often require down payments as large as 50%, and they usually charge higher interest rates than other loans.
Seller financing
Vacant land is often offered with the option of seller financing. Owner financing is arranged between the seller and the buyer directly. This can be useful for buyers who find it challenging to finance their land purchase with a traditional lender.
4. Understand zoning
When purchasing an existing home, you can be reasonably confident that it was already zoned for a residential building. This isn't necessarily true when buying land to build a house, so finding out what you can do with the property before you go under contract is essential.
Purchasing a plot of land with zoning restrictions can quickly kill any custom home building plans you have. Research the land and conduct your due diligence, such as going to the county planning office and asking them directly if there are any building restrictions.
If you aren't sure what questions to ask, contact an experienced real estate agent knowledgeable about vacant land. They'll be able to guide you through the process and help you find any information that may negatively impact the land's possible usage and value.
One of the most crucial steps in purchasing a plot of land is to have the area surveyed by a professional. The surveyor will tell you the dimensions of the land, whether anyone else has a right to use the property, and, if you decide to build on it, how accessible the land is.
Other factors to consider are whether the land's soil prevents the safe construction of a home or the digging of a well. Sometimes, environmental problems crop up that make building an impossibility.
You should also consider whether the land is classed as wetlands because the regulations on this type of property can be severe. Laws differ between the city, county, state, and federal level. It is crucial that you try to find local wetland inventory maps, as these can help you locate problem areas.
5. Evaluate the cost of adding utilities
Utilities such as water, electricity, and natural gas are necessary for residential properties and are usually managed by the county. If you would prefer a more rural setting for your land build, you will have to find out whether existing utilities are in place.
When there are no utilities, calculate the additional expense of installing a well and septic system and running electrical lines.
If you're not sure the extent of the work that may need to be done, consult an experienced real estate professional who can help you find local contractors and source quotes. You may need to alter your purchasing budget depending on the quotes you receive.
6. Get quotes from local builders
Designing your custom-built home is probably the most enjoyable part of the process. To ensure that you find a builder who really understands your wants and needs, you must be clear about your expectations and timeline.
Aim to speak to several different contractors and ask them for in-depth quotes. A custom home build takes an average of over six months to complete, so you and your contractor must have realistic expectations about the cost of the project and your anticipated move-in date.
The joy of a custom home is that you can design it to meet your needs, and while this is wonderful for you, it may not be ideal if you ever have to sell your home. Speaking to a local real estate agent can help you decide what features will improve resale value in your area and what to expect when you sell your home.
Consulting a local property expert can also help you avoid pitfalls such as an "overbuilt" house that you will have trouble recouping your investment from at a later date.
» MORE: Connect with an agent with experience in custom-built homes
Timeline for building a home
To give you a clearer picture on what to expect when building your dream home, here is a general timeline of how your home will come together.
Here are the steps to building a home, week-by-week:
📅 Before you build
Before a shovel even touches the ground, thoroughly prepare a building plan. This is also the point where your vision comes to terms with your budget. In this stage, you'll work with architects, designers, contractors, tradesmen, real estate agents, lenders, engineers, and inspectors to create the home you've always envisioned but can also afford.
Once you move ahead with the build, know that changing your mind about designs, materials, and floorplans will be more difficult, costly, and time-consuming. Also, be certain about your wants and needs ahead of time so there's clear communication with everyone on the same page.
🏗️ Week 1: Site excavation and leveling
Once you've received financing through a lender, scouted and purchased a plot of land with your real estate agent, planned the home, and received permits, you're ready to begin building your dream home.
During the first week of construction, a crew will come in to prepare the lot for your foundation. This includes leveling the ground, removing any large boulders, creating erosion barriers, and excavating a space if your home design has a basement or crawl space.
This phase also includes placing the footers, or concrete bases, that will support your home's foundation.
🧱 Weeks 2 to 3: Foundation work
Once your footers are in place and have passed inspection, foundation work can begin. The workers will pour the concrete slab, providing a sturdy base for your home.
🚪 Weeks 4 to 6: Framing
As workers move into the framing stage, you'll see your home take shape. Framing is like building the skeleton of your home — you'll see the floor plan, different levels, and cut-outs for doors and windows develop.
At this point, exterior walls and your roof will also be completed, along with sheathing to protect your home from the elements as construction continues. You should also expect another inspector visit to ensure the framing passes code.
🛠️ Weeks 7 to 8: Mechanicals
While this step may not be as dramatic as putting up the walls and roof of your home, installing the mechanicals will allow you to go to the bathroom inside rather than in an outhouse in your yard. The mechanicals include plumbing, electrical systems, your heating and cooling units, as well as wiring your home for a security system if you choose to have one.
Once the mechanicals are installed, you'll have running water, working outlets, and enough wiring for light fixtures and appliances. Because insulation typically covers up wiring, an inspector will generally give the go-ahead on your electrical systems before adding insulation.
🧰 Weeks 9 to 10: Insulation and drywall
Next comes the insulation and drywall. Your contractor will install the insulation first to help maintain a comfortable temperature and provide some soundproofing.
Then, the drywall will go up in the interior, be sanded and primed, and possibly even get a first coat of paint. By the end of this step, your house will look like a home.
👷 Weeks 11 to 12: Flooring and painting
Your design and vision will begin to manifest at this point in the construction process. The floors and cabinets you carefully and specially picked will be installed, along with any built-in shelves and interior doors. Plus, all your walls will be given a coat of paint.
During this time, the crew will finish the exterior walls, such as adding brick, stucco, or siding. You'll also see work on your driveway, walkways, and landscaping.
🛁 Week 13: Adding appliances and fixtures
The countdown to your home's completion has begun. You'll see a lot of activity throughout the week as plumbers, electricians, and subcontractors install your sinks, faucets, countertops, appliances (such as your refrigerator, washer and dryer, and stove), light fixtures, outlet covers, and more.
Your HVAC system and electricity will be turned on to ensure proper operation. You'll also see drastic changes to the outside of your home as workers put the finishing touches on the exterior and landscaping.
🏡 Weeks 14 to 15: Final touches
You're almost ready to move in. The only thing left is final inspections where the inspector ensures everything is up to code and meets proper safety requirements, but you'll also do a final walk-through inspection, taking note of any issues or minor changes you'd like to have done.
Once everything looks good and meets the inspector's and your standards, you can close on your home, move in your belongings, and revel that you're now living in your ultimate dream home.
Ready to find land and build your dream home?
If you're ready to buy land for your one-of-a-kind custom build but aren't sure where to start, Clever can help.
We can connect you with a top-rated local real estate agent who specializes in land purchases and can help you find the right property for your needs and budget.
And, if your purchase qualifies, you could get a cash-back refund when you close on your new property!
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FAQ
How much does it cost to buy land and build a house?
The average cost to build a house is $392,241 (or $153 per square foot), according to a 2022 survey conducted by the National Association of Home Builders (NAHB). Your actual costs will depend on factors like the price of your building lot, your new home's size, and the cost of building materials in your area. Buying land to build a house? Learn how to get a cash-back refund when you close!
What are the steps?
The major steps to buying land and building a house include finding land for sale, arranging financing, understanding zoning restrictions, determining whether your lot is suitable for building, evaluating the cost of adding utilities, and getting quotes from local home builders. Ready to get started? Find the best websites for buying land.
How do you finance it?
When buying land to build a house, there are several ways to finance your building lot and construction. Many lenders offer construction loans, which cover buying the land and building your new home. You can also get a land loan, although these loans usually have higher down payment requirements and interest rates. Learn more about getting pre-approved for a home loan.
How much down payment do you need?
Down payment requirements depend on your loan type and lender. On a new construction loan, you may be able to find lenders that require down payments of 10% or less. But, if you're purchasing raw land to build on later, your lender may require a down payment as high as 50%.
