There haven’t been an adequate number of homes accessible for how much purchasers who need to be mortgage holders. That lack and different elements have pushed home costs to record-undeniable levels. Assuming you’ve been placing in offers just to be taken down, it very well may be an ideal opportunity to ponder an alternate methodology: purchasing a home that hasn’t been fabricated at this point.
What types of new-construction homes can you buy?
D.R. Horton, Lennar, Ryan Homes, Toll Brothers and Pulte Group are the absolute greatest names in the structure business. In any case, these organizations don’t all form similar sorts of homes; the mark “new development” can arrive in at least one or two arrangements:
Custom: Appropriately named, custom homes can be redone to your accurate inclinations. Consider building one of these the same way you could contemplate planning your own shirt: You get a say over everything about goes into it. With a custom home, you could buy a land parcel and afterward work with a manufacturer to decide everything from the front door handle to the kind of rooftop. These are the most costly sort of construct.
Semi-custom: This is the following stage down from custom. While you will not get to pick all that goes into the property, you will have a few choices to browse. Possible, an engineer previously purchased the land and you’re presently ready to have something to do with gets done and different variables.
Creation or spec: With this kind of new-development home, you don’t get to alter everything, except that likewise implies you will not need to pay such a great amount for everything, all things considered. These will quite often have the quickest timetables and are normally the least expensive choice.
Current housing market and new construction
The current housing market and the broader inflationary challenges of the economy make buying new construction especially challenging. Everything has gotten more expensive in the past year, and that includes the cost of building materials, which has gone up 19 percent in the past year, NAHB reports. Meanwhile, mortgage rates have surged above 5 percent. Even for those who can afford to build brand-new homes, no amount of money will be able to speed up the process — supply chain issues are making it tougher to obtain everything from windows to garage doors.
Pros and cons of buying new construction
Buying any home comes with certain advantages and drawbacks, but buying new construction has a unique set of pros and cons to consider.
Pros of buying new construction
- Ability to get exactly what you want
- Likelihood of lower maintenance and utility bills
- No need for immediate renovations
Cons of buying new construction
- Higher price
- Longer timeline (with likelihood of delays)
- Off-gassing health issues
Pros of buying new construction
- Ability to get exactly what you want: If you can afford a completely custom home, the biggest upside is that you won’t have to compromise on anything. Whether you want to work with an interior designer or handle all the decisions on your own, high-end new construction gives you a chance to build the home of your dreams.
- Likelihood of lower maintenance and utility bills: It’s brand-new, so you’ll likely avoid some of the common maintenance issues that come with buying an older home, at least in the first few years. Plus, the home will likely have more energy-efficient systems, which can save you on utilities.
- No need for immediate renovations: Buying a preowned home often means you’ll be exploring renovations, or at least minor remodeling projects, out of the gate. With new construction, you likely won’t need or want to make changes right away.
Cons of buying new construction
- Higher price: Building your dream home can come with a nightmarish budget. Be ready to pay more for something brand-new than you would for something that’s already standing.
- Longer timeline (with likelihood of delays): If time isn’t on your side, new construction can be especially frustrating. If you buy an existing home, for example, you might be able to close and move in less than a month. With new construction, it might take you a month just to secure permits. That timeline can get even longer if your builder runs into issues with sourcing materials or workers.
- Off-gassing health issues: New carpet, new floor, new paint — all those new materials can emit chemicals that aren’t great for your lungs. These won’t stick around forever, but it’s important to keep in mind if you’re planning on moving in immediately after the builder completes the work.
Tips for financing a new-construction home
There are different types of construction loans, including loans that strictly pay for the project and loans that convert to permanent mortgages once the home’s finished.
When financing new construction, the key is to lock in your rate for a longer period of time, up to a year or more.
“A borrower that qualifies at today’s interest rates may not qualify later if rates go up during construction and they haven’t locked in an interest rate,” says Kelly Ann Zuccarelli, a new-construction executive with Wells Fargo Home Mortgage.
While the builder’s doing all the construction work, you’ll have the responsibility of keeping your loan on track, too, including staying organized and communicative if anything changes with your employment or financial situation.
“Keep your personal records accessible while your home is being built because credit documents are only good for 120 days,” says Zuccarelli. “You may need to provide updated bank statements two or three times, pay stubs and other credit documents as well.”
Steps for purchasing new construction
If you’re planning to buy new construction, here are key points in the process:
- Get preapproved. By getting preapproved for a mortgage, you’ll have a clear picture of how much you can borrow and what your monthly mortgage payments will be. With those numbers in mind, you’ll be able to narrow your search between a high-priced custom home or a cheaper spec home. Begin by comparing several construction loan lenders.
- Enlist a real estate agent. A real estate agent, especially one that specializes in new construction, can help you scout for sites for new homes, connect you with a builder and navigate other complexities unique to this type of transaction.
- Find the right builder and location. If you can, gather recommendations for local builders in addition to major developers. Smaller builders that have a big presence in your city or town likely have the experience you need with securing permits and dealing with other local compliance concerns. Whichever builder you’re leaning toward, confirm licensing and insurance and search the Better Business Bureau or elsewhere online for complaints or red flags.
- Set a timeline and plan for moving. Once you select a builder, get a timeline based on the phases of the project, then plan for inevitable delays. For example, if you’re selling your current home, you’ll want to make sure to have a short-term rental as a backup in the event your new-construction home isn’t ready on time.
- Get the property inspected. When the property is finally ready for occupancy, have it inspected by a third party (not just your builder), and make sure you understand what the builder’s home warranty covers.