New Construction Home Buyer Guide
Negotiate still; though it might be harder to convince a builder to lower the price on new construction homes. Furthermore, restrictive covenants may apply and you will likely need to conduct a final walk-through prior to signing an agreement and closing.
Your Realtor(r) should have experience managing complex negotiations, which could save you thousands in fees and costs.
1. Find a Lender
New construction homes can provide buyers with modern amenities, less wear and tear and the ability to customize certain features. While new builds may be more expensive than existing homes and the purchasing process differs considerably; therefore it is crucial that potential buyers understand all aspects of a purchase before making their decision.
One of the key differences in financing between new construction and resale homes lies in financing. While buyers of resale properties typically take out mortgages, those purchasing new builds must secure a home construction loan – this type of loan releases funds in increments called draws directly to builders as construction progresses, with repayment in full once finished rolled into a permanent mortgage loan. Unfortunately not all lenders offer such loans; therefore it is imperative that buyers find one who does.
Preapproval is the ideal way for buyers to discover what their budget will allow and remove any guesswork about loan amounts, no matter if the buyer is buying a tract home, semi-custom home, or custom house.
Buyers should also keep their service area in mind when considering lenders for new construction loans. Certain lenders only provide them in specific states or regions, which could limit options. Furthermore, certain lenders offer longer rate lock periods for those building their new construction home in order to protect from possible rate hikes during construction.
2. Get PreApproved
Assuming you don’t plan to pay in cash, most likely obtaining a new construction home requires taking out a mortgage loan. Before meeting with builders who offer homes within your budget range and meeting with lenders to figure out your monthly mortgage repayment.
Tour model homes to see what options are available, but be mindful that what you see may not reflect what is actually offered – model homes often contain upgrades you won’t be able to afford independently when buying the property, and many new builds belong to homeowner associations with membership fees attached.
Understand your timeline for finishing your new home is equally as essential. Builders typically aren’t allowed to close on loans until construction has concluded, which could cause months-long delays. Speak with your builder about their anticipated completion timeline for finishing, and ensure you have a back-up plan just in case they change unexpectedly.
Financing a new construction home is similar to financing an existing property; pre-approval is still necessary and an adjustable-rate loan might be the way forward. Some lenders provide construction loans that convert directly to permanent mortgages upon completion of your home, saving both time and money; this service works hand in hand with your builder for optimal efficiency.
3. Make an Offer
Purchase of a new construction home can be thrilling! Not only will you become the first owner, but this opportunity gives you an unprecedented chance to personalize it as your own with upgrades that reflect your tastes.
As with any upgrade decision, it is wise to carefully weigh all options when making upgrades. Extra costs can quickly escalate past your budget; your real estate agent can help by counseling on which upgrades make the most financial sense for your family – for instance if cooking is what keeps you occupied most often it might make more financial sense to use your upgrade budget on improving the kitchen or countertops rather than an outdoor deck or pergola.
Consideration should also be given to the community you’re purchasing into, with details from your agent on current crime rates, future development plans and proximity of amenities that interest you as well as any HOA dues that could significantly eat away at your budget.
No matter whether you are buying a tract home or spec home, obtaining a construction loan will most likely be required. Look for lenders with excellent customer service, decent rates and who understand the new home building process – either your real estate agent can suggest one, or you can do some online searching for “new construction loans”.
4. Schedule a Walkthrough
A final walkthrough is an integral step before closing on a new construction home, providing you with one last opportunity to double-check that everything promised in your purchase agreement is present and working as promised. Unexpected issues, such as unfinished kitchen cabinets or missing outlet covers or leaky windows should never spring as surprises; should any be identified it’s important that your real estate agent work with the builder to negotiate repairs as soon as possible so as not to delay moving in.
As part of your walkthrough, it’s also essential to look out for signs that the house was not thoroughly cleaned before you moved in, such as paint splatters and uninstalled cabinet knobs/drawer handles.
If any issues arise during the final walkthrough, it’s essential that your real Estate agent discuss them with the builder immediately. They can create an itemized list of fixes and work together with them toward finding solutions; if repairs cannot be completed by closing day, your agent can recommend delaying closing until everything has been addressed.
Finding your new construction home can be both exciting and stressful at once, which is why it is essential to hire an agent with experience when purchasing one in Ashland, Framingham, Natick or Holliston or any other Metrowest Massachusetts town. Contact me for more information about buying one!
5. Sign the Contract
Assuming everything goes according to plan, the purchase agreement between you and your builder should contain all of the terms for buying your new home. It should include details about the property itself, construction timeline and cost estimates, payment schedules (if applicable), warranties and more. Your real estate agent should review this contract to make sure it’s accurate and meets your needs; now would also be an opportune time to ask about loan programs, rates and incentives offered by lenders preferred by builders.
Custom and semi-custom homes typically allow for considerable negotiation. Depending on your builder, you may meet with their architect/design team to discuss upgrades or specifications before finalizing and including these in your sales price. Trac and spec homes typically limit how many changes or upgrades can be implemented before finalizing and including them into the sales price.
Buyers purchasing new construction homes in neighborhoods with homeowner’s associations should review the governing documents to become familiar with any restrictions or dues associated with their home and what their dues will cover. You should also bring proof of homeowner insurance with you to their closing appointment as lenders can request this documentation at that point – failing which your closing could be delayed significantly.
The purchase of a new construction home can be an intricate process requiring numerous steps, and working with the appropriate real estate professionals and lenders is key for making sure it goes as smoothly as possible.
Experienced buyer’s agents are an essential asset when navigating the new construction process. Focusing on your best interests, they’ll navigate complex negotiations effectively on your behalf to save both time and money in negotiations that could otherwise prove futile. Plus they will help find lenders with competitive rates, fantastic customer service and an understanding of this complex industry – they truly become your partners for success during new construction!
One key consideration in homebuying is a builder’s timeline for completion. If your schedule is limited, tract or spec homes might be better options than custom builds that take longer to construct.
Guarantees from your builder should include details regarding completion date and features included with your home.
Closing involves signing all necessary mortgage documents and transferring funds for your purchase, while conducting a final walk-through to ensure everything meets your expectations. Closing typically occurs at a title company with buyers, their agents, and an escrow officer present – or mail-out closing for mail-out closing. Closing is essential in guaranteeing all terms and conditions have been fulfilled as promised in your contract.