Buying A New Construction House
How easy it is to find a new construction home to purchase also depends on the market. New housing construction tends to rise during strong real estate markets, and declines as the market declines. For example, the cooler market of early 2023 meant fewer housing starts compared to a year earlier, when the market was red hot.
buying a new construction house
Once the building is completed, the loan will either be converted into a typical mortgage, or your construction lender will require you to obtain a separate mortgage. Unfortunately, not all lenders offer this type of loan. Builders generally have a list of recommended lenders and may even entice you to use one of those lenders by reducing the price.
However, before signing with any lender, do your research! Make sure they have a good reputation, decent rates, excellent customer service, and that you understand how their construction loan product works from beginning to end.
While there may be less room for negotiation when it comes to the new construction homebuying process, you can (and should!) still gain as much clarity as you can around what happens if unforeseen issues arise during building.
New construction also means the house and everything in it will be more energy-efficient. There will be modern windows installed in the home, better insulation, more efficient heating and cooling, and even appliances that use less electricity and water.
A new construction home is a home the buyer is the first to live in, but that can happen in a few different ways. You may buy a home designed and built by a builder who builds an entire development, or you may do all the work, hiring all contractors and subcontractors to build your home from the blueprints you helped create.
Part of knowing how to buy a new construction home is understanding the customization options. In some cases, you choose every little detail of the home, and in other cases, you only have a say on a few features or designs.
A new construction home can be a solid investment because of its new age. With no one living in it yet, the value may appreciate faster than a home with multiple owners through the years. But like any investment, a new construction home has pros and cons.
Buying a new construction home can be one of the most exciting purchases you will ever make. The ability to customize a home exactly how you want or at least choose some of the customizations makes homeownership even more special.
Your role in the construction and design of a newly built home can be wide ranging. It might involve purchasing an open spot of land and overseeing the entire home construction project; or it could be buying a home in a neighborhood planned and constructed by a builder with limited options. There are three major categories of newly built homes:
Buying a newly built home is similar to the process of purchasing a previously owned property, but there are important differences. Here are the six most significant steps when purchasing new construction.
Buying a new home is an opportunity to get a fresh start in what could be your dream home. The key is preparing for the unexpected twists and turns that make this different than buying a previously-owned home.
It is recommended that a newly built house should be inspected twice. The first time should happen while it is still under construction, just before the drywall goes up. This way, the inspector can make sure the electrical wiring and plumbing was done correctly.
The approval process for getting a construction loan is similar to applying for a mortgage to buy an existing home. The lender reviews documentation you provide in support of your loan application as well as the sales contract, construction plans and specifications in order to also approve the builder.
If a brand-new house is at the top of your wish list and you're ready to splurge, now might be the time to dream big for you and your family. But sometimes, that home sweet home we imagine isn't based on reality. A new-construction house can have headaches, just like an existing home in an established neighborhood. The key is recognizing the drawbacks because new isn't always worth the drain on finances.
Buyers expect to pay for a home and the property it sits on, but new construction takes it to a whole other level that may break some budgets. Do you wonder who pays for driveways, sewer lines, sidewalks, and utilities? The answer is typically the buyer, and these expensive items contribute to making a new construction home roughly 20% costlier, says Bob Vila.
Like a new car that gets significantly more costly with each add-on feature, a new-construction home can be upgraded right out of your price range. The financial danger is real for those who go way beyond the home's base price trying to create their dream home. The cost of upgrades depends on what you choose and which builder you hire. Can't do without quartzite counters and a marble backsplash? Expect to pay top dollar for such amenities. Sometimes just mirroring the featured home in an advertisement means incorporating lots of pricey upgrades, says Realty Times. Even a garage door opener can mean shelling out extra because, you guessed it, it's another upgrade.
If unexpected costs are associated with new construction, the buyer is typically the one paying the difference. Anytime there is a building project, a variety of unknowns can impact finances. So many things are beyond the builders' control, including the price of lumber, construction supplies, and delivery delays, which can take an economic toll. When this happens, the builder will likely try to pass this on to the buyer.
Homebuyers have long been accustomed to negotiating with sellers to get the best price for a house. Offers and counteroffers have been a hallmark of real-estate transactions. Maybe you're used to flexing your bargaining skills or have a dynamo of a real estate agent you trust to whittle down a home's price. Then you might be disappointed that there's limited or no room to bargain over new-home construction. If you simply must have some bargaining power, a newly-built home may not be the best option.
Keeping your eyes wide open to the expenses associated with new construction includes knowing in advance about the cost of loans and taxes. If you're paying cash for your new build, then go ahead and skip this part. For everyone else, building a custom home is likely to mean a construction loan. Designed to cover the expense of custom construction, including materials and labor, these loans usually run 12 to 18 months, says The Mortgage Reports. Expect around 1% more than a typical mortgage rate. Down payments also run 20% to 30%, according to NerdWallet.
Not only can a builder be a hassle to work with, but they can ruin a home with shortcuts and lower-quality materials. When homes are in demand, builders might stretch things thin to make deadlines. True, building inspections guard somewhat against safety issues, but they haven't eliminated the horror stories from buyers stuck with a construction headache. Millionacres explains that when buying new construction, you will typically get "builder grade quality," which means the materials and features are more economical than quality.
When packing essentials for your move, earbuds are not likely to make the top of your list. But they can be indispensable. Buyers who are early birds in a new subdivision often must deal with daybreak drilling and other noise, not to mention blocked sidewalks and truck traffic as the rest of the development takes shape. No doubt living in a work zone of a neighborhood, even if just for a short time, clashes with the idyllic vision expected of a new home setting. But it may not be a short time. Bob Vila says new neighborhood construction can create a racket for months or even years. Best to pack your patience as well.
For some, the space available for backyard living is almost as important as the house itself. Parents want ample space for kids to play ball, climb a play structure or maybe jump on a trampoline. They don't want neighbors close enough to watch their every move. For buyers who can't wait to barbecue for friends and family poolside every weekend, the smaller lot sizes associated with many subdivisions may prove disappointing. According to Bob Vila, lot sizes in new developments are typically dwarfed by those in older established neighborhoods, although there are exceptions.
Another thing to consider is the cost difference between a builder upgrade versus hiring your own contractor to do the work later. Harris, the Denver buyer, had the option to include an air conditioner in her new home. She saved $1,000 by having the unit installed after she moved in rather than adding it to her construction tab, she says.
Buying a new construction home offers a lot of perks. But there are plenty of pitfalls as well, so buyers should pay close attention every step of the way, and enlist the help of an expert when necessary. Carefully consider all the pros and cons of new construction before signing on the dotted line for your shiny new home.
Besides cost, another factor to consider when choosing a customization option (and whether to go with new construction at all) is timing. Overall, the timeline for building a home can be unpredictable, because of weather, vendor delays, and waiting for logistics like permit approvals to happen.
Buying new construction is like any home purchase: you need a team with your own interests at heart. Research, interview, and hire your own real estate agent, and apply to multiple mortgage lenders to find the best deal, just like you would with an existing home purchase.
Usually, warranties on new construction homes offer limited coverage on workmanship and materials. Some coverage is offered for just the first year (for siding, doors, and trim, for example); some for two years (often for HVAC, plumbing, and electrical), and some for a decade for major structural defects.
Are you thinking about buying a new construction home? The idea of purchasing a brand-new house is appealing to many homebuyers. Going directly to the builder and being the first to live in a home offers advantages. 041b061a72