Get Your Guide "How to Buy Land and Build a House in Chicago in 2022"

Right now America is experiencing one of the biggest housing booms in its history. The need for a "Safe haven" in the post-pandemic world has created a new demand for buying land and building a house on it.

Chicago iL is one of the most sought-after destinations in the country — it is important to choose the land, plan the building process and count construction costs wisely. Fortress Home experts have prepared this step-by-step guide for you to successfully purchase land and build your dream home on it.

Step 1. Understand how much land you need

Before purchasing land, you need to figure out what size of the plot you really need. In our experience, many homeowners overestimate their capabilities of managing their own premises.

Do you really need so much land to build? Or maybe you belong to the modern category of buyers who prefer to invest money in a better house, have a solid down payment, and pay the mortgage faster?

Sit down with your family or with a good real estate agent and create a realistic list of your housing needs.

  • Begin with the main house and its area in square feet (plus the garage, patio, etc.). The average American house is 2000 sq/ft
  • Add the desired objects or outdoor spaces and their areas in square feet (art studio, pool, playground, garden, etc.). Let's say, 500 sq/ft more
  • Be honest with yourself and decide what area of vacant land is too much for you — do you really want to spend extra on the gardener and pool maintenance? Today, the average backyard in the state of Illinois is 12,000 sq/ft. But, let's say, you have decided to save on the land purchase and have a 7,000 sq/ft lawn
  • Multiply your future real estate area — in our case, it is 9,500 sq/ft or 0,218 acre — on the average land costs / per acre in the Chicago area ($663 000). Land purchase would cost you about $144,534.

This simple "exercise" helps to realistically compare your dream home expectations with real financial possibilities, as well as to understand that you are on the same page with your family members.

Step 2. Going solo or with an agent?

To find land — is the most important step of all. After you have chosen the desired area and have a few options from your online research, you can go only two ways: simple or complicated.

  • To get a completely undeveloped raw land and perform the local zoning, soil, water tests, and other preliminary processes yourself
  • To purchase land from a builder/agent who has already subdivided the land, legally approved it for the residential construction, prepared the plot for development, and has all the needed legal documents for the deal.

We advise the latter. By buying land from a reputable developer, you can be sure that all the paperwork is legal, coding and zoning ordinances have been maintained, water quality, as well as the quality and the safety of soil, are approved and, what is the most important — there are no building restrictions.

Looking for a general contractor in Chicago? Fortress Home has been in business for over 20 years!

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Step 3. Find that perfect plot of land

Make 100% sure of the quality of the land. The absolute musts:

  • Soil is of a high grade and not contaminated
  • There are no hidden underground waters
  • There are no hidden underground structures
  • The plot is not prone to fires, floods, earthquakes
  • The utilities (electricity, gas, plumbing) are either on the plot or easily accessible.

In case you decide to save money and are looking at raw land listings (or you just fell in love with a particular plot), get ready to get a new profession and dig deep: learn zoning laws and zoning restrictions, become a regular in the local municipality, collect information about necessary permits and residential development, find out peculiarities on underground waters, explore septic systems... The list is very long.

If you still are determined with this choice but want to make the process easier, it makes sense to hire a knowledgeable agent who has good experience in this particular area.

Step 4. Evaluate the construction costs

You can always Google construction costs in your area, but it is always better to refer to a reputable developer for an estimate. Here at Fortress Home, we can offer you a variety of options depending on your vision of your dream house. You don't need to count the cost of building materials or keep in mind other factors — let us know what kind of new property you want and we will come up with the most accurate budget.

The developer will offer you two options — a pre-designed house or a custom build with the help of the architect's developed blueprint which needs to pass all official approvals (a more expensive choice).

According to the National Association of Home Builders, average construction costs here in Illinois are about $450,000 but can be as high as $740,000, depending on the type of the house. But to get a personal quote, give us a call at 773-770-8607!

Step 5. Set up a budget

In the journey on how to buy land and build a house on it, the preliminary costs might differ from the final budget spent. Before you really dive into it, count all the possible expenses with your real estate agent or builder and imagine the worst-case scenarios.

A common pro-tip — is to add an extra 10% to an initial budget. But in the ideal world, this sum has to be higher, and it shouldn't be your last money.

In our case, the cost of our desired vacant land is $144,534. Let's say, the construction costs estimated are $550,000. Total budget: $694,534. Total budget with added 10% — $763,987.

Don't forget to add the costs of decoration and furniture as well as regular housing payments (insurance, property taxes, fees, communications, etc.).

Step 6. Choose your financing options

This step can include different scenarios — from construction financing to land loans, from a typical "easy" mortgage to a more complicated one, with extra paperwork and permits:

  • Buying land to build (and a future house) from a developer allows you to easily refer to standard financial instruments. If you pay cash for it, you can save up on interest rates, have a good down payment, and save extra on your home built
  • In case you have chosen to purchase raw rural land — you will most likely need to pay cash for it. A raw land loan is possible, but it is more rare and complicated than a traditional mortgage
  • If you are opting for a new construction loan, you need to provide a bank with a detailed plan of the property and your future house. The paperwork for the construction loan is usually being managed by the developer. Keep in mind, that the title companies can be a bit tight with their decision because of the unknown date of the construction end

Final mortgage rates would depend on your credit history and the conditions of the current deal.

How to find the best interest rates? Talk to your future neighbors from the nearby homes and ask them which options they chose — or ask the builder. For example, Fortress Home has been on the market since 1995 and we can advise you of reputable financial partners.

The average interest rates for a fixed 15-year loan stand about 2,375%. In the case of our final budget, $763,987 the monthly payment is or $1512.

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Step 7. Get the paperwork done

By this moment you would have already chosen the plot of land and the building option — a pre-designed or a custom home. Usually, the builder takes care of all the necessary paperwork both for the land purchase and the building process: permit from the local municipality, approved house plan, size, its placement on the plot, all the zoning and code ordinances, etc.

Now it's time to sign the contract with your builder. It is a very important step that needs extra attention. Read the draft thoroughly, better — with the help of the lawyer. Ask a lot of questions. Do not sign until all of the doubts have been cleared up.

After all the paperwork is done, you need to pay the deposit and trust the rest to the professionals — they can begin building.

Remember, in the case of new home construction you won't be able to close the deal until the house is completely finished.

Step 8. Get ready for your house to be built!

In the US the whole process of new construction usually takes up to 7-8 months but can last as long as 1 year.

Don't forget that the builder has to get the team of workers/subcontractors on the site, break ground, demolish an existing house if there is one, prepare all the utilities, deal with supplies, etc.

Each stage of the building process is being approved by a municipal building inspector to meet all of the requirements.

Construction costs can rise insignificantly (check out this part of your agreement). After they are completed, you can finally close the deal and get your keys!

Frequently Asked Questions

Is it possible to buy land and build a house?

Definitely! There are multiple options — from trendy tiny homes on modest plots of land to impressive residences with vast grounds. The choice is yours! But in any case, it is always worth it working with a reputable local developer. This would help to get a good interest rate, secure yourself with a 100% plot of land, and, of course, have solid and timely construction.

Here at Fortress Home we have more than 20-year experience in building houses in the Chicago, Illinois area. Feel free to call us at 773-770-8607 for a free consultation and advice!

Is it cheaper to buy your own land and build?

It totally depends! If you dream of a custom home in one of the central districts of Chicago, the chances are high that it would be more expensive than getting an existing house in a rural area. But getting land and building on it with the help of good real estate agents who work with trustful developers can in fact save you a lot of cash: all the paperwork would be ready, the plot thoroughly inspected and developed, all permits received. Therefore, you can get both — the land that you love and your dream house.

Is it better to buy land first and then build?

In fact, it often is the only possible way. In order to begin construction, according to US laws, you must obtain full ownership of the plot. If you are buying land from the developer directly, it will help you to save time and get a good interest rate from a trustworthy loaner.

How do I buy land with no money?

With the help of a reputable developer who will offer you a good deal for purchasing land and building on it, get all the paperwork done and connect you with a good loaner or a title company.

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Fortress Home combines the roles of a general contractor, a construction partner, and a construction manager. Our talented workforce helps us professionally manage all aspects of on-site construction.

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