The idea of building a custom home that meets your family's precise needs — one that perfectly reflects your taste and personality — can be incredibly alluring. Everything is all shiny and new. No surprise maintenance issues or unexpected repair costs. These benefits, in and of themselves, may prove enough justification to move ahead on a custom build for some.
Others may be more attracted by the allure of an existing home in an established neighborhood — preferring the relative comfort, ease and predictability of buying and potentially modifying or updating versus the time and effort it would take to build their dream home.
However, the number of available homes remains just a little more than half (56%) of the inventory a decade ago.1 Not surprisingly, this ongoing lack of supply keeps values high and drives increased competition, as witnessed in the unusually high percentage of all-cash deals. According to year-end sales data published by Redfin, the share of all-cash home purchases climbed to nearly 31% in 2024.2
Key takeaways
While a highly personal and subjective choice, your decision on whether to build or buy a new home should be guided by these five key criteria:
Key considerations for your decision
The decision to build or buy is complex, with each approach presenting its own set of challenges, advantages and drawbacks. Here are five critical factors to evaluate when making your choice:
Making your decision
Determining which approach is right for you and your family will ultimately be a personal and subjective choice guided by your specific circumstances, priorities and financial situation. A decision of this magnitude can significantly alter your overall financial picture, so it's essential that you consult not only with builders, architects, and real estate professionals but also with your advisor, who can provide access to a Bank of America home loan specialist, and tax professional who can provide additional insights tailored to your specific needs and circumstances.
Topics to discuss with your advisor
Consider these questions as you evaluate your options:
How much time are you willing and able to commit to the undertaking?
How flexible or exacting are your expectations and requirements?
Are there specific factors (such as a growth in family size, moving closer to family or friends, a career move or retirement) driving the decision as to where and when you plan to move?
1 Federal Reserve Bank of St. Louis, “Housing Inventory: Active Listing Count in the United States,” January 2025.
2 Forbes, Jamie, “2024 Housing Market Year In Review: A Tale of Supply, Demand, and Mortgage Rates,” Redfin, January 2025.
3 National Association of Home Builders, May 2024.
4 Federal Reserve Bank of St. Louis, “Median Sales Price of Existing Homes,” January 2025.
5 The Loan Management Account (LMA account) is a demand line of credit provided by Bank of America, N.A., Member FDIC. Equal Opportunity Lender. The LMA account requires a brokerage account at Merrill Lynch, Pierce, Fenner & Smith Incorporated and sufficient eligible collateral to support a minimum credit facility size of $100,000. All securities are subject to credit approval, and Bank of America, N.A., may change its collateral maintenance requirements at any time. Securities-based financing involves special risks and is not for everyone. When considering a securities-based loan, consideration should be given to individual requirements, portfolio composition and risk tolerance, as well as capital gains, portfolio performance expectations and investment time horizon. The securities or other assets in any collateral account may be sold to meet a collateral call without notice to the client, the client is not entitled to an extension of time on the collateral call, and the client is not entitled to choose which securities or other assets will be sold. The client can lose more funds than deposited in such collateral account. The LMA account is uncommitted, and Bank of America, N.A., may demand full repayment at any time. A complete description of the loan terms can be found within the LMA account agreement. Clients should consult their own independent tax and legal advisors. Some restrictions may apply to purpose loans, and not all managed accounts are eligible as collateral. All applications for LMA accounts are subject to approval by Bank of America, N.A. For fixed-rate and term advances, principal payments made prior to the due date will be subject to a breakage fee.
6 Borrower is responsible for fees. Minimum borrower liquidity of $3,000,000 or $5,000,000 net worth (including primary residence), and $1,000,000 post-closing liquidity. The minimum loan amount is $2,000,000. Other restrictions apply, ask for details. Custom residential real estate financing may involve special risks and is not suitable for everyone. Please obtain advice from your third-party legal, tax, insurance and accounting advisors before changing or implementing any financial, tax or estate planning strategy and to determine what custom residential real estate solution might be right for you.
7 Extended rate lock options require a lock-in fee. A portion of the lock-in fee may be applied to closing costs at loan closing. If the loan does not close, the lock-in fee may be refunded in full when certain conditions are met and required documentation is timely provided. See the Interest Rate Lock-in Agreement and Confirmation and Float Down Addendum for details. Pricing is based on extended rate lock options which are 120 days, 180 days, 270 days and 360 days. You should consult your home builder to help you choose a reasonable closing date when construction will be completed and within the lock-in period. Float down option is subject to time limits, other restrictions apply. May not be available for all loan programs.
8 If within 60 calendar days prior to the original requested closing date (“Float Down Option term opens”), our pricing for the product and lock period you’ve selected is better than as shown on your Interest Rate Lock-in Agreement and Confirmation, you may exercise a one-time float down which may lower the interest rate or discount points, or both (“Float Down Option”).
Please consult your tax advisor regarding interest deductibility.
Bank of America, N.A., (the “Bank”) does not serve in a fiduciary capacity with respect to all products or services. Fiduciary standards or fiduciary duties do not apply, for example, when the Bank is offering or providing credit solutions, banking or custody services or referrals to other affiliates of the Bank.