The Best Option for First-Time Home Buyers: Buy, Build, or Renovate?

Choosing between buying a move-in-ready home, building a new house, or renovating a fixer-upper can be overwhelming for first-time home buyers. Each option offers unique benefits and challenges, and the right choice depends on your budget, goals, and flexibility. With the current low supply of entry-level homes, it's essential to evaluate your options thoroughly before making a decision.

Should You Buy a Move-In-Ready Home?

Buy If You're Ready for a Competitive Market

Purchasing a move-in-ready home offers convenience, but it comes with its own set of challenges. The current housing market is highly competitive, especially for entry-level homes. With inventory levels at historic lows, finding the right house can be tough, and you may face stiff competition.

“You have to be ready to go yesterday,” says Simone Plush, a real estate agent with Century 21 New Millennium in the Washington, D.C. area. For first-time buyers, the process can be an emotional roller coaster. Plush recommends being strategic and swift when making an offer on a turnkey home. One effective strategy is to look at homes priced slightly below your budget, giving you room to make a competitive offer above the asking price if needed.

When the process feels overwhelming, it's important to reconnect with your “why”—whether that’s having a backyard for your kids or being close to work. Staying focused on your goals can help you navigate the ups and downs of house hunting.

Should You Build a New Home?

Build If You Want Control and Customization

Building a new home might seem daunting, but it doesn’t have to be. Many homebuilders offer "quick move-in" homes that are newly constructed and ready for occupancy within 30 to 90 days. This option is ideal if you want a brand-new home without the long wait.

“In many of our communities, home buyers have the option to purchase a quick move-in home,” says Jessica Hansen, vice president of communications for D.R. Horton, a major homebuilder based in Arlington, Texas.

Construction timelines vary, but some builders can complete a home in just three to four months, according to Jeff Mezger, president and CEO of KB Home. This timeline is comparable to the average home search, which takes about 10 weeks, followed by the closing process.

One of the biggest advantages of new construction is the peace of mind that comes with modern systems and home warranties. However, this convenience comes at a higher cost—new homes typically cost about $85,000 more than existing homes, according to data from the National Association of Realtors (NAR). Additionally, building new might not be feasible in urban areas where land is scarce and expensive.

Should You Renovate a Fixer-Upper?

Fix If Location Is Your Priority

If you're set on a specific neighborhood, renovating a fixer-upper might be your best option. Although more challenging than it appears on TV, this route allows you to buy a home in your desired location at a potentially lower price.

A survey by NAR found that 26% of first-time home buyers compromised on the condition of the property to get into the right location. Given that nearly 80% of homes in the U.S. are at least 20 years old, and 40% are over 50 years old, according to Harvard University's Joint Center for Housing Studies, this compromise is common.

David Pekel, CEO of the National Association of the Remodeling Industry, advises first-time buyers not to shy away from homes with solid mechanical and structural components that may need cosmetic updates. “You can fix ugly,” Pekel says.

Before purchasing a fixer-upper, work with a qualified home inspector to assess the property's condition. A contractor can help outline the necessary repairs and provide cost estimates. Some contractors may charge a consultation fee, which is often refundable if they are hired for the job.

Financing Options for Your Home Purchase

No matter which path you choose—buying, building, or renovating—there are various financing options available. Beyond conventional mortgages and standard government-backed loans, specialized construction loans and renovation loans can help with new builds or remodeling projects.

Find the Right Lender

It's crucial to work with a lender who understands your specific needs and can guide you through the available financing options. They can help you determine the best loan product for your situation, ensuring that you're financially prepared for the homebuying journey ahead.

Conclusion

Whether you decide to buy a move-in-ready home, build a new house, or renovate a fixer-upper, each option offers its own set of rewards and challenges. By carefully considering your goals, budget, and long-term plans, you can make an informed decision that will set you on the path to successful homeownership.