The complete guide to buying land and building a house

If you’ve been searching for the right house, you’ve probably discovered that supply is tight in many areas across the U.S. The statistics back this up. According to the National Association of REALTORS^® (NAR), supply of existing homes on the market was just 4.1 months based on the March 2026 pace of sales. Supply of new homes is better at 9.7 months, but these make up a smaller fraction of the market compared to the existing supply. While supply has loosened up, it is still worse than it has been in the past few decades.

Given the challenges of the market, building your own place certainly has some appeal. Rocket Mortgage doesn’t offer construction loans or land loans, but we can help you when it comes time to convert to permanent financing. We’ll walk you through the process of buying land and building a house, the costs involved, and key considerations for deciding whether to buy land and build your own home.

Why would you want to build a home?

Every home buyer has different needs, and some might prefer building a home rather than buying an existing one. Some reasons that might make you want to build your own home include:

• Struggling to find a desirable property on the market
• Having more options for the location
• Being able to customize all the home’s aspects, including modern and energy-saving features
• Desiring long-term value and flexibility for expansion
• Avoiding hidden issues that can come with existing homes

How much does it cost to buy land and build a house?

The cost to buy land and build a house varies based on several factors, like its location, size, current real estate trends, the availability of materials and labor, land prep requirements, and home features. Buying undeveloped land is generally cheaper than buying an existing house, but some parcels may still be quite pricey.

The latest report from the National Association of Homebuilders stated that construction costs accounted for 64.4% of the average price of a new home in 2024, which was up from the previous report.

How to buy land and build a home

There are many steps that go into buying land to build a house, and it’s easy to become overwhelmed. The first major step is to identify where you want to live and how you plan to pay for the property. From there, you can begin working with a builder to begin the construction process.

1. Consider where you want to live

Before you start working with a real estate agent or looking at land, you need to figure out where you want to live. Take some time to think about your goals and what makes sense for your lifestyle.

Is it important that you live close to the city so you have easy access to restaurants and activities? Do you spend a lot of time outdoors and want to be close to parks and other outdoor activities? Or do you have young kids and want to build a community in the suburbs?

Figuring out what your priorities are will help you determine the location that makes the most sense for you. From there, you can begin looking for land that meets your needs.

2. Explore financing options

Next, you need to figure out how to finance buying land and building a house. Listed below are some financing options you can consider to purchase the raw land. Keep in mind that some lenders, including Rocket Mortgage, do not offer these options.

Here are a few different financing options to consider:

• Land loans: A land loan is a type of financing used to purchase a plot of land, and it can be used for residential and commercial purposes. A land loan tends to be more difficult to qualify for than a typical mortgage since there’s no home the lender can use as collateral
• Construction loans: Another option is to take out a construction loan, which is a short-term loan that covers the cost of buying land and constructing a home. It will pay for the land, labor, materials, and permits.
• Land contracts: Land contracts are an alternative to a traditional mortgage and are typically used when buyers are unable or unwilling to take out a mortgage. A land contract is an agreement to purchase land directly from the seller instead of using a lender. You’ll make payments on the land until the loan is repaid in full.
• Personal loans: Another option you might consider is taking out a personal loan to purchase the raw land. Personal loans are unsecured loans offered by banks, credit unions, and online lenders, and can be used for any purpose

3. Find suitable land

Once you know where you want to live and have worked out the financing, it’s time to start looking for land for sale. You might start by browsing listings on Redfin or other land websites. But many people find it useful to buy land by working with a real estate agent. A real estate agent can help you find listings that you may not have access to on your own.

When visiting potential properties, you’ll want to pay attention to any utility hookups, the slope and soil quality, its distance to amenities, and zoning laws. It can also be a smart move to assess for feasibility, including having the land surveyed and checking for existing liens.

4. Make an offer

Once you’re ready to move forward with the land sale, your real estate agent can help you determine a reasonable offer to make to the seller, including any necessary contingencies. Once the seller receives your offer, they’ll either accept or decline it.

In some cases, they may make a counteroffer for you to consider. Hopefully, your real estate agent can work with the seller to reach an agreement you’re both happy with.”

5. Lay the groundwork for building your home

After the seller accepts your offer, you’re ready to lay the groundwork for building your home. Here are the steps you’ll need to take to get started.

• Hiring a team of trusted professionals
• Handling tasks for prepping the land for building
• Determining a budget for your home
• Deciding on a home design and lot layout
• Getting the right permits and approvals

6. Close on the property

When you’re buying land, you’ll have to close on the property, as you would with any other real estate transaction. You should receive a closing statement a few days before closing, which outlines the details of the contract. Once all issues have been resolved, you’ll be clear to close.

Make sure you have your attorney run a title search on the property before closing. A title search will uncover any liens on the property that could prevent you from obtaining a clean title.

7. Build the home

If you’ve never built a home on site before, you may be surprised at some parts of the building process. Some phases of the process happen very quickly, where you might think that you’ll be done within weeks. Other phases happen very slowly, and you might wonder if it will ever be done. It’s important to understand the different phases of the process, including inspections, timelines, and potential snags like delays or cost variances.

One tip to make the process go more smoothly is to closely monitor the progress of the build and reach out to your builder if anything seems to be taking longer than expected. You’ll want to have regular close communication with the builders and inspectors.

Is buying land to build a house right for you?

Now that you understand how the process of buying land and building a home works, how do you know if it’s the right decision for you? Again, this depends on your goals and expectations. It’s a good idea to understand the pros and cons of this decision before moving forward.

Pros

• You’ll get the home you want: Most people choose to build their own home because they have a very specific idea of what they want. If you need a finished basement, a wrap-around porch, or a bedroom on the first floor, you can get all of those things.
• You can live anywhere: Another advantage of building your own home is that you have endless choices as to where you can live. As long as the land is suitable for building, your options are more open.
• You’ll need fewer repairs: No home is maintenance-free, but when you build a new house, you may not need to worry about as many repairs. And your builder may offer a 1-year warranty on the home.

Cons

• You can pay more: Buying land and building a home is typically more expensive than purchasing a home that’s already built. You’ll want to have in-depth conversations with your builder to ensure this option is affordable for you.
• It can take longer: If you want to buy a home and move quickly, then building a house isn’t the best option for you. If everything goes exactly right, you may be able to buy land and build a home in 6 months. But the process could end up taking more than a year.
• It’s more complex: Buying land to build a home can be a frustrating process since it’s more complicated than buying a preexisting home. From securing the land loan to finding a builder, there are several hurdles you can run into.

FAQ about buying land and building a home

The decision to buy land and build a home isn’t an easy one, and you want to make sure all your questions are answered before moving forward. The following information may help with some additional questions you have.

Can I combine loans for my land and home?

There are a few different options if you want to combine loans for buying land and building your home. Some loan types to consider include FHA construction-to-permanent loans, a VA construction loan, or a regular construction loan.

Is it smart to buy land and build later?

In some situations, it can absolutely make sense to buy land now, even if you have no immediate plans to build a home. Situations where you might want to consider buying land are where you know where you want to live permanently or where you find a great deal on a parcel of land.

What is the typical down payment to buy land?

Lenders usually require a higher down payment to buy land than for buying a house. This is because lenders often view land purchases as riskier, since there’s no structure as collateral, it doesn’t generate income, and it might be harder to sell if you default on the loan. Rather than a down payment of 5% to 20%, a land purchase might require up to 50% down. Some land purchases may not qualify for a loan at all, requiring you to pay for the whole purchase upfront.

Do I have to work with a real estate agent to buy land?

There’s no legal requirement that you have to use a real estate agent to buy land, but it’s a good idea. A real estate agent can help you find land that meets your needs and negotiate with the seller on your behalf. The average person doesn’t have the necessary experience and skill set to negotiate this process on their own.”

Does buying land and building a home come with tax benefits?

There can be some tax benefits for buying land and building a home, but they generally only kick in once there’s a home on the land. The IRS does not allow a tax deduction for mortgage interest on raw land without a home on it. Consult with a tax advisor for how the tax laws might apply to your specific situation.

The bottom line: Buying land and building a house offers flexibility

If you’ve always wanted to build your own home, buying land to build a house may be a good option for you. The process can be lengthy and complex, but it may be worth it if you end up with your dream home.

However, there may be a home already on the market that could meet your needs. If you’re ready to buy a home, you can start a mortgage application with Rocket Mortgage today.

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