How to buy land and build a house

Buying land and building a house lets you customize a home exactly the way you want it — but the process is a little different from buying an existing house. According to data from the U.S. Census Bureau, it took an average of 10.1 months to complete a house in 2022. In addition to the time, you’ll need to learn how land purchase financing works, whether you’ll need a construction loan, and how to get the site prepped and permitted for building. This guide will show you the process of buying land and building a house so you can decide whether this method is right for you.

What are the steps to buying land?

Before you begin, it’s a good idea to know your budget, how much you have saved for a down payment, and what features you’re looking for in a plot of land. Enlisting a real estate agent and a builder before you search can help you avoid costly mistakes later.

Decide how to pay for it

Not everyone has enough cash on hand to buy land and build a new home. If you plan to borrow money to build your custom home, it’s important to know ahead of time so you can account for the loan process in your timeline. Borrowing will also affect how much you’ll need to save for a down payment since buying land usually requires a heftier deposit than buying an existing home.

Search for land

An experienced real estate agent will be able to help you find the right type of land, whether you’re looking for raw land or an improved parcel that’s ready to build on. 

“Planning is everything,” said Mariana Castro, a real estate agent with KC Homes Group in Kansas City. “Raw land that has not been touched requires more prep before building, such as leveling the area and bringing in utilities.”

Research and evaluate the land

Once you’ve found a piece of land that appears to tick your boxes, it’s crucial to do your due diligence. In addition to researching the property yourself, including checking the area’s zoning laws, you’ll want to bring in experts, too. They can help you determine whether the property is suitable for building and tell you what to consider before your purchase, such as ordinances that restrict what and where you can build.

A land surveyor will tell you the property’s boundaries, required setbacks, easements, road access, and utilities. The average cost for a land survey is about $540, according to home services site Angi.com.

You can also invite your builder to help you find the right parcel, as they’ll know whether a piece of land is suitable for your build. “We always recommend that a buyer selects a builder first and visits the potential sites with their builder,” Castro said. 

Make the purchase

When you’re ready to purchase, secure your financing and work with your real estate agent to make an offer to the seller. The seller can accept your offer, counter with their own offer, or decline the offer. 

The final purchase agreement should contain the terms of the sale, including the purchase price, deposit amount, description of the land, settlement date, and any contingencies, or conditions that must be met, and deadlines.

Hire your team

One of the most important steps of buying land and building a house is choosing experts who will help you, such as an architect to design the plans for the home and a builder who will execute those plans. You may also want an attorney to help review your contracts and to make sure your plans conform to all necessary legal requirements. When the land is under contract, hiring experts to inspect the property and advise you will save you money and headaches down the road.

Close the sale

Whether or not you’re working with a lender, you’ll need to close the sale to make the transfer of ownership official. This includes transferring the title from the seller to you and recording the deed with the county or other local government office. Make sure you receive copies of all important documents, including the results of any inspections or reports. Keep in mind that both you and the seller may need to pay closing costs, which are the fees and expenses involved in transferring ownership and completing the sale.

How to finance a land purchase

There are two common ways to buy land to build a house: with a land loan or with a construction loan.

Land loan

If you don’t plan to build right away, you can use a land loan to borrow money to purchase just the land itself. This type of loan usually requires a bigger deposit than other types of home loans, since there’s no home yet that you can offer the bank as collateral. You may be able to find land loans through banks, credit unions, or co-ops. You’ll need additional funds or financing to build the house.

Construction loan

A construction loan lets you finance both the purchase of the land and the construction of the home. This type of loan typically starts out as an interest-only loan you can use to buy the land and building materials, then converts to a permanent, fixed-rate mortgage once the home is built. 

You can apply for construction loans from banks and credit unions. There are also government-backed construction loans for eligible buyers, such as an FHA or VA construction loan. Another example is the single-close loan program from the U.S. Department of Agriculture (USDA), which lets you buy land in an eligible area and build a single-family home, including paying contractors, covering inspection fees, and even paying for landscaping.

Other options

In addition to land loans and construction loans, you may be able to finance a land purchase in other ways. Personal loans, for example, often don’t place a restriction on what you can do with the funds. Land contracts are another way to buy land, usually involving a contract between the land seller and the buyer. 

What are the costs involved in building a house?

Here are a few costs to consider in addition to the price of land:

• Site prep: The land will likely need to be prepared for building, including removing trees and creating a flat, accessible area to build. “Clearing a lot can vary in cost from a few thousands to well over $25,000,” Castro said. 
• Utilities: You’ll either need to tie in to municipal utilities for water, sewer, and electric lines, or you’ll need to hire someone to drill wells or install septic systems. “The cost to bring utilities I'd say will start at $30,000 at a minimum in most affordable areas,” Castro said.
• Construction materials: Lumber and other materials will figure heavily when determining the cost of building a house. According to the National Association of Home Builders (NAHB), material costs have accelerated in 2024, despite broadly falling inflation, and that has a direct impact on the cost to build. 
• Labor: Labor costs for professional builders can eat up 25% of the budget on a new build, according to the NAHB, and small-volume builders (such as for a custom home) could cost even more.
• Landscaping: Sod, shrubs, trees, and flowers are the finishing touches of your new home build, and will cost between $1,200 and $6,000, according to Angi. 

How to obtain necessary permits and zoning approvals

Home construction requires several different types of permits, including for building, electrical, and plumbing. Building permits can cost between $450 and $2,850, on average, according to Angi. Your builder can often obtain permits and approvals for your building project, but it’s a good idea to research your local government’s regulations to make sure you know what to expect. 

What is the process of site preparation and construction?

Site preparation will vary depending on whether the land is “raw” and untouched or has been improved. Preparing the land for building may include: 

• Clearing trees
• Surveying the lot
• Grading and leveling
• Establishing proper drainage
• Marking the building site
• Testing soil 

Once the site is prepared, construction can begin. This usually includes:

• Foundation
• Framing
• Rough-in of plumbing, electric, heating, and cooling systems
• Drywall and interior finishes
• Siding and other exterior finishes

As the builder performs each step, your home gradually takes shape until it’s completed.

How to buy land and build a house FAQ

Can you get a mortgage for buying land?

You can get a loan to buy land. However, it’s not the same as getting a mortgage on a house, because there’s no house yet. Land loans typically require bigger down payments and have higher interest rates than home mortgages.

What should you look for when buying land?

Look for land that is buildable. In other words, is it zoned for a residential home? Can you access or add utilities? Is it relatively level or able to be graded? Is the soil suitable for a septic system and proper drainage? Your real estate agent or builder can help you evaluate possible properties as you shop. 

How long does it take to build a house?

While the process of buying land to build a house can vary from one person — and one lot — to the next, it can take six months to a year from purchase to the beginning of construction, Castro said. After that, homebuilding can take another six months to a year to complete.

What are the benefits of building a custom home?

Building a custom home has several advantages, one of which is size. One-third of existing homes are under 1500 square feet, whereas most new homes built in 2023 were 2200 square feet, according to the NAHB. Custom builds allow you to get the square footage you want. You’re also not limited to what’s available on the market or through a housing plan, and can add luxury or function as you see fit. Finally, with a custom home, you can tailor the space to add multi-generational living space, an accessory dwelling unit, or features that will allow you to age in place, giving you more time at home and more enjoyment while you’re there.