How to Build a House in Alaska

Alaska, the northernmost state in the U.S., is known for its majestic snow-covered mountains, sea fjords, and glaciers. The step-by-step process to build a house in Alaska can be complicated by its remoteness from the rest of the country. Overall, the cost to build a house in Alaska averages $228,064, according to GoBankingRates. That makes it the seventh most expensive state for homebuilding. Labor costs in Alaska average $23.88 per hour, the fifth highest in the country. 

Location is one of the main factors that influence the homebuilding cost in Alaska. For example, it costs more to build a home in the state’s three largest cities – Anchorage, Juno, and Fairbanks – than in most rural areas in Alaska.

There are about 240 remote villages and communities in Alaska, but whether homes are less costly to build there depends on how difficult they are to reach. Although homes in rural locations typically cost less to build, they could end up costing more in some instances because of the complication of getting materials and labor. Of course, those are offset by lower land costs in rural areas. 

The materials you choose and the size and style of the home you build also impact the average price of homebuilding in Alaska.

Custom vs. Production Homes

A major choice that impacts the cost is whether you want to build a custom home. Typically, custom homes cost more because you pay separately for the homesite, land preparation, setting up utilities, obtaining permits, hiring an architect and a builder, and then sourcing labor and materials for the project.

Alternatively, a production home is built within a planned community or a cluster of homes by a builder. It is usually less costly than a custom home. You’ll choose a lot and a floor plan, but all costs are wrapped into one price by the builder, who already owns the land.  

In this article, we’re talking about how to build a production home in Alaska.

Step-by-step Process to Build a House in Alaska

Building a house in Alaska usually takes about seven months from contract to completion.

You can take the following steps to build a home in Alaska: 

Budgeting for your new home

Before you can get to the fun part of touring model homes and choosing the features and finishes you want in your new home, you need to develop a financial plan. It’s not fun to fall in love with a house and discover you can’t afford it. 

Start by reviewing your budget in the context of your financial goals. Lenders often prefer to approve loans when the monthly housing payment is 28 percent or less of your gross monthly income. Financial experts recommend keeping your housing costs below 30 percent of your gross income. Your monthly housing payment will include mortgage principal and interest, property taxes, and homeowner’s insurance. You could also be required to pay private mortgage insurance if your down payment is less than 20 percent. Most new homes are built within a homeowners’ association (HOA), so you’ll likely need to pay HOA dues.

Your down payment will impact how much you need to finance to build your new home. Estimate how much you have available now, how much you can save before your down payment is due, and how much you can get in proceeds from the sale of your current house if you have one. You can also check out homebuyer assistance or special loan programs at DownPaymentResource.com to see if you qualify.

Next, go to a lender for a mortgage pre-approval. You’ll need to have your credit checked and provide documentation of your income and assets for a full pre-approval. This will help establish your price range and show the builder that you can afford to buy a home.

The price per square foot to build a house in Alaska averages $125 to $285, which would be $312,500 to $712,500 for a 2,500 square foot house. In most cases, 50 percent of the cost to build a house in Alaska is allocated for materials, and labor costs are 30 to 40 percent of the price. 

When you’re developing your budget, you can also estimate your property taxes and homeowner’s insurance. 

Homeowner’s insurance for a $300,000 home in Alaska costs an average of $1,799 per year according to Insurance.com, which is 22 percent below the national average of $2,305. 

In some locations in Alaska, homeowners don’t pay property taxes at all. But for those who do, Alaska’s average property tax bill is higher than in other states. The average property tax rate is 1.18 percent in Alaska, which is higher than the 1.07 percent national average, according to SmartAsset.com. However, there’s no income tax in Alaska. Some full-time state residents also receive dividends from the state that could offset property taxes. 

HOA dues vary widely, so you’ll have to wait to compare communities to determine how much they will add to your monthly budget.

Choose your builder and community

After you’ve made a financial plan and have established a price range, you can begin your search for the community and builder for your home. You probably already have a general geographic region in mind. Now, you can go online and sort your options by price range as well as location. Each community will likely have descriptions of planned amenities and how they will look once complete. You can check out photos, renderings, virtual tours, and floor plans for each builder in the community. You can go directly to builder websites as well for more information. You can also find reviews of builders at TrustBuilder®.

Next, move from online to real life by visiting the communities matching your price range and wish list. You can tour model homes and meet with sales professionals to learn more about the community and the available floor plans. Be sure to ask residents you see in the community about their experiences. 

Line up your financing

Now it’s time to get back to finances. Once you have chosen your builder and community, your builder will likely want you to have loan approval from a list of preferred lenders or an in-house lender affiliated with the company. You don’t have to use one of these lenders, but there are some benefits to doing so such as working with someone familiar with your builder and community. In addition, some builders offer incentives such as an optional upgrade or paid closing costs for choosing their lender. You can always shop around and compare rates and terms so you’re comfortable with your financing choice. 

Typically, you’ll make a deposit when you sign the contract to build a house in Alaska. The rest of your cash won’t be needed until the closing date, so you’ll have time to accumulate your down payment and closing costs, which are usually two to five percent of the price of the home. 

Choose your lot, floor plan, and upgrades

When you sign the contract and make your deposit, you’ll choose your floor plan and the homesite where your home will be built. If your builder offers optional features, you need to choose those options early in the process so materials can be ordered. If you’re making structural changes, they must be part of the original contract. 

The sales professionals onsite can help you determine which floor plan can be built on which lot. In some cases, the floor plan you want will only be available in certain locations because of the lot configuration or the streetscape of the community. Some lots require additional payment.

Before you commit to a lot, be sure to ask about plans for the surrounding area so you don’t build a house with a view that will disappear in future construction phases. 

You’ll also need to be careful about which features are included and which are optional. If you want to make upgrades, be sure to consider your budget. Some builders allow almost unlimited personalization, while others offer a choice of packages. 

Permitting and inspections

When your production home in Alaska is being built, your builder will take care of all permit and inspection requirements. Alaska does not have a statewide building code, but there may be local codes to meet. 

Talk to your builder about when it’s appropriate to schedule your home inspection. 

Climate considerations

Alaska is known for its extremely cold temperatures. Climate change is causing rising sea levels as well as prolonged wildfire seasons. When you build a home in Alaska, ask your builder about the best choices for insulation, roof shape, window strength, and other materials that could increase the resilience of your home. 

Another resource with state-specific information is the Buyers Guide to Resilient Homes. 

Timeline

Weather issues can be intense in Alaska and may impact the construction schedule. Your timeline can also be affected by labor and material shortages. On the other hand, it could take less time than anticipated to go through the step-by-step process to build a home in Alaska, especially if your builder has already prepped the lot and obtained some permits. 

While your home is under construction, your builder and your lender will be the best resources for information on when to list your current home, when to lock in your mortgage rate, and when to prepare to move.