If you plan to build a house in Alabama, you’ll be happy to know the average cost is lower than in most states, according to GoBankingRates, at an average cost of $175,061. Alabama has the 16th-lowest estimated cost to build a house in the U.S. and the third-lowest average construction labor costs.
One of the most important factors in how much it costs to build a house in Alabama is the location. In general, it costs 4 percent less to build a house in Alabama than the national average. If you want to build a house in Bellamy, the average is 5 percent higher than the national average, but if you prefer to build in Huntsville, it typically costs 1 percent less. Huntsville, the largest city in Alabama, has a population of 208,000 and has grown by 15 percent over the past decade. The city is high on the list of best places to live because of its quality of life, job market, desirability, and affordability. Birmingham is nearly as large as Huntsville, with a population of 206,000, and costs 2 percent more than the national average to build a home. In Montgomery, which has a population of 197,000, it costs 2 percent less than the national average to build a house.
Custom vs. production homes
While there are many variables that affect the cost of building a house in Alabama, one of the most important is whether you choose a custom home or what’s called a “production” home. Prices for custom homes vary widely according to the size and style, the quality of the materials, the land costs, and whether you need to pay for infrastructure such as a road and utilities to serve the property. Financing a custom home can be more complex than a production home.
A production home refers to a home designed and built by a builder in a community with multiple homes. The level of personalization varies from one builder and community to another, but typically you’ll pay one price for the land, materials, and labor. You’ll choose the lot and floor plan and, if the builder agrees, you can make optional upgrades. In this article, we will discuss how to build a production home in Alabama.
Step by step process to build a house in Alabama
It takes an average of seven months to build a house in Alabama, but the specific time depends on numerous factors. These can include the permitting and inspections processes, the size and style of the home, and the availability of labor and materials. In some cases, builders will start the permitting process and even lay the foundation of a home to speed up the home building process.
The following steps are part of the journey you’ll take to build your Alabama home.
Budgeting for your new home
The most important step you can take before building a house in Alabama occurs before you’ve begun to look at communities and model homes: preparing a financial plan for your new home. First, you’ll need to determine how much you can comfortably afford to spend on your monthly housing costs, including the principal and interest on a mortgage, taxes, homeowner’s insurance, and possibly homeowner’s association dues.
Your next step should be to consult a lender and obtain a loan preapproval. This will help you establish your price range for a new home, and give you an opportunity to evaluate your finances and credit. Then you can make any necessary corrections or changes. Your preapproval letter doesn’t commit you to that specific lender, so you will be able to switch to another lender when you’re ready to buy.
The price per square foot to build a house in Alabama averages $90 to $137, which would be $225,000 to $342,500 for a home that measures 2,500 square feet. However, your price can vary widely according to your location, land costs, and the materials used to build your home.
The price for materials consumes about 50 percent of total expenditures when you build a home in Alabama. Since labor costs are lower in Alabama – and represent about 30 to 40 percent of the cost to build a house – building a home is less expensive in Alabama than in other states.
Materials prices fluctuate, but builders can obtain lower prices by buying in bulk. The lumber costs range from $25,000 to $65,000, depending on the style and size of your home. The roof will cost another $1,000 to $3,000. Other major expenses include insulation, which costs $.10 to $1.00 per square foot, and concrete could cost from $1,000 to $10,000 or more. If you want siding, that will cost $2 to $15 per square foot.
The choices you make for your flooring, appliances, and fixtures will also impact costs. For example, flooring ranges from $1 to $5 or more per square foot.
In addition to construction costs, you’ll need to budget for insurance, homeowner’s association dues, and property taxes. Homeowner’s insurance in Alabama costs an average of $3,439 per year, according to Insurance.com, the fourth highest in the U.S. compared to the national average of $2,305. However, property taxes are lower in Alabama than in most other states, at an average of $609 annually, according to SmartAsset.com. The national average property tax bill is $2,578. Homeowner association dues vary according to your location and community amenities. When you shop for a home, you can ask for an estimate.
While some builders pay closing costs as an incentive to work with their preferred title company and lender, you’ll still need cash for a deposit and down payment. Closing costs, which you may have to pay, vary by your jurisdiction and average 2 to 5 percent of the home’s purchase price.
Choose your builder
Your financial plan for building a home in Alabama will help you narrow your choice of builder, as you’ll need to stay within a certain price range. You can search online in the location where you want to build a home in Alabama and then visit websites for communities. Some communities have more than one builder, so you’ll want to check out the websites and information about each one if you like the initial impression. Next, visit model homes. Talk to residents in communities with homes by builders you like about their experiences with the builder. You can also check reviews on a builder at TrustBuilder®.
Line up your financing
Once you’ve made your decision, it’s time to finalize your financing for your new home. Some builders may have an in-house lender or a list of preferred lenders. You can apply for a loan with the builder’s preferred lender and compare rates and fees when you shop around. Generally, your builder’s lender will stay in close contact with you and the builder and may make the financing process easier. In some cases, working with the builder’s lender will come with perks such as paid closing costs or sometimes an upgrade on the house.
You’ll need to make a deposit, which could be 10 percent or less of the purchase price when you sign the contract. Additional cash may be needed later to pay for upgrades beyond the normal optional choices and at the closing for the remainder of your down payment.
If you need extra cash, you may want to check out state and local homebuyer programs in Alabama for down payment assistance, which can be found by searching DownPaymentResource.com
Choose your lot and your floor plan
When you build a house in Alabama, you’ll have the opportunity to choose the floor plan you prefer and the lot where you want the home to be built. However, your choices depend on the availability of the lots, your budget, and whether the model you like can be built on your preferred lot. In some cases, only certain floor plans can be built on specific lots. Some lots require an additional fee depending on their size or location.
The sales professionals who work with your builder can help you make these decisions. Be sure to ask about plans for the community that can impact the desirability of your lot, such as future construction. You will want to clarify which features are optional on your selected floor plan and which are standard.
Permitting and inspections
Your builder will obtain permits and have mandatory inspections when you build a home in Alabama. There’s no statewide building code for newly built homes in Alabama, but local jurisdictions have code requirements that your builder must meet.
If you’d like to have your own home inspection, you can coordinate with your builder to determine when it would be the right time to bring in a third-party inspector.
Alabama’s most extreme weather season is in the spring, when the state experiences more tornadoes and severe storms. Heatwaves combined with high humidity can be an issue in the summer in Alabama. Some locations are at risk for wildfires. Hurricanes and coastal flooding can also be a threat to some areas. When you build a house in Alabama, you may want to discuss climate with your builder. This knowledge will help you determine if you should make specific choices for the shape of your roof or the materials you choose to make the home more resilient to weather conditions yet stick to your budget. The Buyers Guide to Resilient Homes also has useful information for homebuyers.
While your home is under construction in Alabama, you should stay in close contact with your lender and your builder. The step-by-step process to build a house in Alabama takes an average of seven months. However, it could be prolonged by the weather, the availability of labor and materials, and whether any construction began before you signed the contract. Your best source of information while your home is being built in Alabama is your builder.
Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades.