Purchasing a new construction home can have unique challenges that are different from buying a resale property. A knowledgeable Realtor(r) who specializes in new construction can help you navigate the process.
A good first step is to meet with a mortgage lender and get preapproved. This will give you an idea of what you can afford.
1. Meet with a Lender
New construction homebuyers should meet with a lender early in the process to get an idea of their loan options. While many builders offer their own lenders, it’s always a good idea to shop around. Not only will this help you find the best rates, but it may also save you money over time. Even a fraction of a percentage point can make a big difference in the amount you pay for your home over 20 or 30 years.
You can often get a better deal by being one of the first buyers in a neighborhood. Builders are often more willing to negotiate on upgrades and closing costs when they know their first few homes will sell quickly. During the negotiation process, experts recommend focusing on features that will add value to your home and not just asking for money off of the purchase price.
Another thing to consider is where you will live while your new home is being built. The process can take six months or more, and it’s not uncommon for the builder to run into delays. You’ll need to figure out how you’ll bridge the gap between your old home and your new one, or you could end up paying for two mortgages. It’s important to talk to your lender and real estate agent about this early in the process. They can help you plan out any action items on your part that need to be done before closing day.
2. Get Pre-Approved
When buying a new construction home, it is important to get pre-approved for your mortgage. Getting pre-approved will help you determine what your budget is for the home and avoid any potential surprises down the road. If you are considering a new construction purchase, talk with your Real Estate Agent and mortgage lender about the process.
There are a few different ways to buy a new construction home: custom, semi-custom, and spec. A custom home allows you to have complete control over the design of the house, whereas a semi-custom home is pre-designed and offers some level of customization. If you are interested in purchasing a spec home, the builder will have a pre-designed home ready to sell.
New construction homes often require HOA dues, which may affect your homeownership budget. Your Real Estate Agent will help you understand the specifics of these fees and how they will impact your monthly costs.
Another important factor in choosing a new construction home is the timeline of building. Typically, it takes 3-12 months to move into a new construction home. This can be a challenge for buyers who need to move in right away or are living in temporary housing. If this is the case, a pre-owned home may be the better option.
3. Find a Builder
The builder you choose will affect your experience from start to finish. A builder with a bad reputation can make the home buying process frustrating, so it is important to do your research. Find out about the builders you are considering by driving around neighborhoods, talking to other homeowners and researching online. Check out their track record, including customer reviews and complaints. Also ask about the builder’s preferred lenders and if they offer incentives.
New construction homes come with a warranty, so you will need to decide if this is important to you. Typically, the warranty will cover the cost of repairs for at least one year, but coverage varies by builder.
An experienced buyer’s agent who is familiar with new construction can help you navigate the complexities of the process, including finding the right builder for you. Also, since buyers are unlikely to get much wiggle room on price, it is important to have an advocate who will be working with your best interests in mind. The right buyer’s agent can also help you understand the contract and ensure there are no unexpected terms or conditions that could hurt your pocket later on. For instance, builders may include homeowner’s association dues in the purchase agreement, which can have a significant impact on your budget. These fees are typically billed monthly, quarterly or annually, depending on how the HOA is set up.
4. Make an Offer
When submitting an offer on a new construction home, it’s important to have an experienced buyer’s agent in your corner. Builders tend to have their own contracts, and a buyer’s agent who is familiar with new construction can review those contracts to make sure you are not signing off on terms that will benefit the builder more than you.
Often, buyers assume they can negotiate with builders to get the price down, but this is not always the case. Builders want to maintain a certain value, and a drop in price can affect their future sales of homes in that neighborhood. Instead, buyers may be better off negotiating for upgrades that will increase the value of the home.
Before the home closes, the lender will send an appraiser to evaluate the property. The appraiser will compare the home to other, comparable homes in the area to determine its value. The appraiser will also look at the quality of the home and the condition of its components.
The last step in the process is the final walkthrough. The walkthrough is an opportunity for the buyer to make sure they are satisfied with the home and that everything is in working order. If there are any issues, the builder will address those in accordance with the express warranty that was included with the home. If the buyer has a real estate agent, they can assist in this process by asking questions and providing documentation.
5. Sign the Contract
When you’re ready to buy a new construction home, the builder will provide a purchase agreement. This contract outlines the terms of your purchase and includes information such as the price of the house, the estimated completion date, who will pay what fees and other important details. It’s a good idea to have your Realtor(r) review the contract before you sign.
A builder’s contract may contain contingencies that you must fulfill before closing, such as a final inspection and obtaining homeowner’s insurance. You may also need to fund a cash reserve to cover unforeseen costs that could arise during construction, such as the cost of a larger HVAC system or adding a Juliet balcony. Your agent will help you understand what these items mean for your budget and negotiate any changes to the contract.
Because you’re buying a new construction home, you may not have the same negotiating room that you would with a resale property. This is why it’s essential to have an experienced Realtor(r) by your side throughout the entire process. They can ensure you have all the right paperwork and can spot any errors before they become a big problem. They will also be able to provide you with valuable information about the neighborhood, including crime rates, schools and proximity to amenities. They can also evaluate the community and its future development, which can impact your home’s value.
6. Close on the Home
Whether you’re buying a new construction home in a tract development or a fully custom build, you need an expert Realtor(r) by your side throughout the entire process. Builders won’t likely budge on price, but an experienced buyer’s agent will make sure that you’re receiving a fair deal. New construction homes often have special contract terms that can leave you vulnerable if you don’t understand them. A buyer’s agent who is familiar with new construction will know how to review the contract and protect you from any hidden fees or charges.
Mortgage financing is a requirement for purchasing any home, and new construction is no different. Before beginning talks with builders, you need an accredited preapproval letter from a mortgage lender. This will allow you to compare loan options and find the best one for your financial situation. Ask your real estate agent for a recommendation or try searching online.
Another consideration when purchasing a new construction home is the amount of time required to close on the property. Unlike existing homes, it can take between 3-12 months for new construction to be completed. This can be challenging for people who need to move quickly or families who are already living in temporary housing arrangements. It’s important to consider the length of the wait and if it would be a good fit for your lifestyle before making a decision.