If you’re considering a move to Indiana, you’ll be happy to know that building a house there costs less than it does in more than half of the states in the U.S.
Whether you want to live in the state capital of Indianapolis, in one of the college towns such as South Bend or Bloomington, or in the second largest city of Fort Wayne, you’re choosing a state with the 18th lowest average cost to build a house. The estimated cost to build a house in Indiana is $178,353. The estimated hourly labor cost is relatively high at $18.57, which makes the step-by-step process to build a house in Indiana a little higher than it would be otherwise.
The average cost to build a house in Indiana depends in part on where in the state you choose to live. Generally, it costs more to build in or near a city than in a rural area because land costs are higher. The price you pay to build a house in Indiana also depends on the size of the house, the design, and the materials you choose.
Custom vs. Production Homes
Besides the difference between suburban, rural, and urban locations, an important difference that will impact the price you pay to build a house in Indiana is whether you’re building a custom home or a production home. A custom home is usually built on land you own or buy and is specifically designed for you. A production home is one that’s part of a cluster of homes or is located in a planned community.
Custom homes usually cost more than production homes because you personally pay for permits, land development, building plans, inspections, materials, and labor. With a production home, those costs are usually wrapped into one cost. The builder can pay for many items in bulk, which can keep costs lower.
This article looks at how to build a production home in Indiana.
Step-by-Step Process to Build a House in Indiana
Typically, it takes about seven months to build a house in Indiana once you sign a contract with a builder. But the step-by-step process actually starts well before the contract is written.
To build a house in Indiana, you’ll need to take the following steps:
1. Budget for your new home
Before you can make any decisions about building a home in Indiana, you must know your budget. Your financial plan should start with an estimate of how much you can comfortably afford for your housing payment, which will include your mortgage principal and interest, taxes, insurance, and homeowner association dues. You’ll need to determine how much cash you have for a down payment, closing costs, and moving expenses. You may have a house to sell before you build your house in Indiana, which can add to the cash for the purchase.
Once you understand your finances, you should gather your documents electronically and consult with a lender. You can share your income, assets, and debts, have your credit history reviewed, and request a mortgage preapproval. Even with a preapproval, you can always switch lenders later. The preapproval establishes your price range and proves your financial ability to a builder.
The price per square foot to build a house in Indiana averages $200 to $350, which would be $500,000 to $875,000 for a 2,500 square foot house. Typically, materials represent about 50 percent of the cost to build a house in Indiana, and labor costs are 30 percent to 40 percent of the cost.
Your cost to build a house will, of course, vary depending on your location, your builder, and any options you have for materials. Your cost could be lower with a production builder with relationships with suppliers and the ability to buy in bulk. Among the most expensive parts of building a house in Indiana are the framing, the windows, and the roof.
Homeowner’s insurance in Indiana is higher than the national average, costing an average of $2,423 per year, which is 5 percent above the national average of $2,305.
Property taxes, on the other hand, tend to be lower in Indiana than in many other states. Median annual property taxes in Indiana are $1,263, about half the national median of $2,578. The average property tax rate is 0.81 percent in Indiana, compared to the 1.07% national average.
To estimate your homeowner association dues, you’ll need to ask about fees at each community you visit. Dues vary according to what amenities are included and the size of the community.
2. Choose your builder and community
Once you’ve established your price range, it will be easier to narrow your choices for a community and a builder. Most new homebuyers begin their search online and explore by location, house type, and price. Many planned communities include more than one builder, so you may want to visit the websites of each builder in a community that interests you.
You can find information about the community plans online as well as floor plans, virtual tours, 3D models, photos, and renderings. You can find reviews of builders on TrustBuilder.
Once you’ve identified communities you like, you can visit them in person. Talk to residents about their experiences and ask questions in the sales office about community plans, amenities, and the timeline for when homes will be complete.
3. Line up your financing
When you’ve chosen your community and builder, you’ll need to be ready to sign a contract. The sales professional on-site will tell you if there’s a minimum deposit requirement and let you know if the builder has a list of preferred lenders for their buyers or an in-house lender.
There are advantages to working with a preferred lender. The ongoing relationship between the builder and the lender means that the lender has an incentive to make sure your loan goes through, and in some cases, your builder will offer to pay closing costs or include an upgrade if you finance the home with their preferred lender. You’re not obligated to work with that lender, so you can also compare rates, terms, and fees with more than one lender before you finalize your mortgage.
In addition to your deposit, you may need to pay cash for unusual upgrades before your house is complete. Closing costs are typically 2 percent to 5 percent of the home price.
You may want to look into homebuyer programs in Indiana to see if you qualify for down payment assistance to help you with the cash needed at closing.
4. Choose your lot and floor plan
Your next step once your financing has been approved is to pick your lot and floor plan. More than likely, you know which home you prefer, but the sales professional will let you know which lots are available for that floor plan. Sometimes a floor plan can’t be built on a certain lot because of its size or because that same model is already under construction on either side.
Be sure to ask about which features are included in the base price and which are upgrades. Before you finalize your lot choice, make sure you know about plans for the surrounding area such as the construction of more homes, retail areas, schools, or other amenities that could obstruct your view or create noise. Find out if the view you treasure will be preserved for as long as you own the home.
5. Be aware of permitting and inspections
In Indiana, builders must meet a statewide building code as well as any additional codes and environmental restrictions mandated by local jurisdictions. Your builder is responsible for obtaining all the necessary permits, insurance, and inspections during construction.
You can hire your own home inspector if you would like additional inspections of the home, but you need to ask your builder about when an inspector can enter the property.
6. Consider the local climate
Indiana residents face a variety of weather-related issues such as summer heat waves, tornadoes, flooding, and ice storms. You may want to discuss some of these risks with your builder to see if there are steps you can take when you build a home in Indiana that could protect your property from damage.
During the average seven months it takes to build a house in Indiana, you should stay in close contact with your builder to monitor the progress. You should also keep in touch with your lender to find out when to lock in your loan rate and to be sure your financing is secure when the home is complete.
The step-by-step process to build a house in Indiana can be impacted by weather, permit delays, and availability of materials and labor. Good communication is essential while you wait for your home to be completed. But before you know it, you’ll be ready to move in and start enjoying your new home in Indiana.
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.