Buying a New Construction Home

Introduction

If you’re struggling to find your dream home in the current real estate market, consider purchasing a newly built home. However, buying new construction involves more than just selecting a floor plan. Both the builder and lender must cover numerous details, which can lead to delays.

Types of New Build Houses

New construction homes come in three main categories:

Custom Homes

• Full control over design and construction
• Most expensive and time-consuming option

Semi-Custom Homes

• Some design options in higher-end neighborhoods
• Less control than custom homes but more than production homes

Spec or Production Homes

• Pre-built with limited customization options
• Least expensive and quickest to move into

6 Steps for Buying a New Construction Home

Get Pre-Approved

1. Secure preapproval from at least one lender
2. Indicates what a lender is willing to offer based on your financial circumstances

Hire a Real Estate Agent

Consider hiring a Realtor for representation and assistance with negotiations and contractual issues

Know Your Timeline

Manage the transition from your current home to the new one with your builder, Realtor, and lender

Research Builders and Neighborhood

1. Investigate builders’ track records and reviews
2. Visit potential neighborhoods to assess amenities and review homeowner’s association rules

Negotiate and Review Your Options

1. Review all options before finalizing the sale price
2. Custom and semi-custom homes offer various choices for interior and exterior details

Schedule Inspections

1. Arrange for independent inspections to ensure the home is built as promised
2. Review your new home warranties to understand coverage and duration

Financial Considerations

Payment Schedule

1. Payments start after the home is built and delivered
2. Builders typically require a down payment followed by scheduled payments

Financing

1. Discuss getting a construction loan with your lender
2. Identify reputable builders and suitable programs

Cash Reserves

Set aside extra funds for potential cost overruns (ideally 20% of the total project cost)

Pros and Cons of Buying New Construction

Pros

• Customization: Tailor your home to your preferences
• Modern Technology: Enjoy the latest in smart technology and energy efficiency
• Lower Maintenance: Fewer immediate repairs and a warranty for unexpected issues

Cons

• Higher Costs: New homes are typically more expensive, with limited room for negotiation
• Uncertain Value Increase: Limited ability to add value in the first few years
• Potential Budget Overruns: Custom homes