With such low inventory, more and more buyers are buying new construction homes. It may make sense for you to do so as well. Below is an overview of buying new construction.
The 3 new construction types
When looking at new construction, you will encounter three types:
1. Custom
This is the most expensive and it takes the longest to complete. So, if these two factors, time and money are on your side then you may indulge in a custom-built home. As the name suggest, it is custom, you would pick and choose every detail of the home. You would obtain a lot, then hire a builder and an architect, and take it from there.
2. Semi-custom
A semi-custom home is like a custom home but you are limited in choices and details. It is the middle ground between a spec home and a full custom home.
3. Spec
A spec home is a home that already have the plans and layout of the house and the main planning and construction of the house in stone, you would have a say in paint color, and other ad-ins that the builder would let you know about. This is the least expensive out of the three types of builds.
Should you buy a new construction?
Should you buy a new construction, below are the pros and cons:
The pros:
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Dream home
Buying a new construction, you can get the home you always wanted that is, if you build custom or even semi-custom. Buying an existing home, you would have to start renovation projects to get the home to your desired liking but with a new build you would have the perfect home from the start.
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New technology, lay out, and features
Since they are new constructions, they will be built while taking into consideration the way of life of today so you would have the newest technology and features and lay out which were not in demand when existing homes were built
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More energy efficient
To continue with new technology and features, your home would be more energy efficient since it would have better quality and improved on insulation, heating systems, and other components.
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Lower maintenance
With a new construction, everything is brand new so it is unlikely that things will start breaking or coming to the end of their life cycle. Even if things were to break you would have a warranty.
The cons:
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Expensive compared to existing homes
A new construction is more expensive than an existing home, in the price and in taxes. And the more custom the more expensive.
Sometimes new constructions are built in area with low utilities, so taxes are at times higher to accommodate for these homes.
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Costs may go over budget
We never know what the future hold. Prices of materials might go up for instance which would raise the cost of building and put a hit on your budget. It is important to expect to pay way more than you intend to.
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Time
It takes a while to build new homes, it takes about 6 months to build a home but some homes may take even up to a year to get completed. And the more custom the longer it takes.
As a rule of thumb also expect the project to take longer than expected.
The process
Get pre-approved
Get a pre-approved with a lender. Talk with your lender about the best type of loan to suit your situation. Your lender might recommend a construction loan, or any loans they offer.
The builders may offer their own financing options, but it is always a good idea to shop around, then after that compare which ones make sense for you.
Hire a real estate agent
Your own agent will have your best interest in mind since they are working for you. When negotiating and managing the process of the home, they will be the one making sure the project goes as smooth as possible.
Know your timing
Know your timing, are you looking to move to a new home in the next 30-45 days then a new construction might not be for you, it can take 6 months for a home to be completed.
If you are okay with waiting that long, then make sure your housing situation is okay and be patient and expect delays if they do not happen great news if they do, you won’t be surprised.
Research builders and neighborhoods
Research builders and the neighborhood you would like to move in. You may find lot for sale and decide to build there or it may be that the builder is already building homes there.
Research reputable builders in your area and have a meeting with them to discuss what you are looking for. Look at their work and ask for references of past clients so you can figure out how was it like working with the builder from the perspective of past home buyers.
After finding a good builder and a good neighborhood. Set your budget
Your budget
After talking with the lender, you will know how much you are pre-approved for on a loan. Some builders will have you put a down payment on the construction and periodically add more to it until the construction is completed.
But also, your budget should include the price of materials. All of these will be discussed in more detail with your builder and agent.
Some things to not spend money on right away are lights, appliances, and outdoors patios.
After the build is over go to the store yourself and pick these up since it may be cheaper and you can get these on sale but if you do not mind the convenience of having the house move in ready but at maybe a higher cost to your budget than that is fine.
Schedule inspections
Builders will have home inspection on the home and the city will also come to do home inspections as the project goes on. However, hire your own inspector to make sure everything is up to par. Have one inspection before the walls go up so you can be sure everything under the walls is all set and then one after everything is ready.
Close and move in
You will get the paperwork, you will review them and sign. The final proceeds will be payed, and you will pay the closing costs. When everything is said and done you will finally own your new home.
Image from unsplash @chuklanov
