Many of us feel that longing for real estate early, much like those friends of mine that suddenly found themselves wanting to start a family a few years after graduating from college.

Plunging into real estate as a prospective homebuyer has thus become somewhat of a rite of passage in American society.

You may already know that a home purchase is on the horizon. But perhaps you’ve got a nagging feeling that you should be building a home of your own rather than browsing the current market.

To build or to buy? That becomes the real question, and an overwhelming one at that. I asked this question of myself several years ago and, to be honest, found it to be one of the most difficult ones I have asked. Nonetheless, I have a few words about answering it wisely and well.  

Really Think About the Future

This may sound trite, but I mention it for a reason. Longevity is important here. Even if you hate the idea of planning months and years from now—and trust me, I’m not one for boxing my future away in the present moment—take some time to identify the shape of the next five or ten years.

I’m talking finances, relationships, and career.

Do you expect to keep your current job for many years down the road? Is your current source of income stable?

How about your location? Are you sold on where you are living, or do you anticipate a more mobile lifestyle for a while? Also consider romantic and personal relationships, such as proximity to family members, plans for a family, or commitment to singlehood.

Better yet, envision your ideal future. Now, where does real estate fit into the mix? This daydreaming alone may give you your answer. I closed my eyes and immediately saw acreage and the possibility of designing my own home. There was my answer.

Perhaps real estate doesn’t quite make sense in the vision you have crafted. That’s okay. You can ask the “build or buy” question further down the road when real estate starts to make an appearance.

Identify Your Needs

If real estate is squarely in your tentative future, consider your needs. If you place a premium on creative license and find yourself dissatisfied with the current market selection, building may be ideal for your aesthetic needs.

But maybe you don’t want to go through all of the work of hiring out contracting services, getting a building permit, and navigating zoning laws. A home that’s already built may be appealing to you for this reason.

Perhaps you like the idea of building but solely for investment purposes. Maybe you like the notion of creating a residence on a plot of land as a future income property.

Identify what your current real estate needs are, even if they are simply to start paying your own mortgage rather than someone else’s as a renter. These can help inform your decision of whether to buy or to build.

Know the Difference Between a Home and a Land Purchase

There’s quite a difference between a home and a land purchase, one that isn’t discussed nearly as much as it should.

For one thing, land purchases have more rigorous eligibility. To finance a land purchase, buyers must often front a 20 or 30% down payment, if not 40 or 50%. Prospective buyers must also qualify with lenders for certain income and credit stipulations; many lenders may not even offer land loans or will require that land loans incorporate construction loans if there is an intent to build.

On the other hand, it is possible to purchase a built home with a small down payment, even as low as 5%. Most anyone can qualify for a mortgage, depending on the lender.

Home purchases, however, may require buyers to take out private mortgage insurance, particularly if they have a credit score deemed “at risk.” This can be costly, particularly for first-time homebuyers.

Understand the distinction between a home and land purchase, particularly the financial distinctions. Sometimes these are enough to clinch the deal. Talk with lenders to learn more about specifics.

Research the Market

Scrutinizing your own future and financial means for investing in real estate should also involve assessing the trajectory of your town or city’s real estate market. Familiarize yourself with market forecasts and watch out for anticipated bursting bubbles (and growing bubbles).

Such forecasts can help you identify whether or not it makes sense to invest in real estate now or later, and whether or not that real estate should be land or a house. I recommend consulting a realtor in your area well-versed in your precinct’s market but be cautious of realtors keen to sway your decision.

Take Your Time   

I can’t emphasize this point enough. When it comes down to whether or not to build or to buy a home, time should be on your side. This is not a decision to be taken lightly.

Take as much time as possible to research your location’s housing market, identify real estate purchase feasibility, and consult agents fluent in navigating this tough decision. I also recommend reaching out to family members and friends to weigh in on their perspectives; sometimes life-changing advice is just lurking underneath the edges of your social circles.

I am of the belief that the right home or piece of land will emerge for you when it is meant to do so, so don’t feel pressure to act now. A hasty decision can have regrettable financial repercussions and can even impact your career. Good luck!