If you’re looking to buy a home, one of the biggest decisions you’ll need to make is whether to buy an existing home or a new build. Many potential homeowners may think buying brand new is out of reach, but the reality may surprise you.
In markets where there’s not enough housing inventory to keep up with demand, builders are responding with new developments that offer buyers a range of price options and customizations. In other words, buying new may not be out of your price range.
Like with any home purchase, there are many factors to consider. A new construction home may cost more up front, but purchasing an existing home could increase costs over time due to
repairs, replacement and upgrades that can quickly add up. The construction of a new home is under warranty by the builder for at least one year, whereas the roof, foundation and water heater may be under warranty for as long as 10 years. Without a warranty, you’ll be on the stick for the cost of any repairs or replacements needed after you close on an existing home.
Older homes are also often less energy-efficient, which will cost you more in the long run. If you don’t have money in savings to cover the unexpected expenses that may accompany the purchase of an existing home, buying new may be the way to go.
Costs aside, with a new build, you have opportunity for customization. Most home builders give buyers a range of choices on finishes, including flooring, cabinets, countertops and fixtures. Joining a new development also gives you the opportunity to make the neighborhood what you want it to be for yourself, your family and your neighbors. If you buy an existing home, you’ll have to fit in to the culture and vibe that already exists.
The process for purchasing a new home looks a little different than if you were to buy existing. Here’s what you need to know buying a new home.
Who will I work with? Many builders have a site manager who will be your main point of contact throughout the process. This person will keep you up-to-speed on what’s going on with the home. If you’re working with a smaller, mom and pop builder, you may work directly with the builder to make decisions and stay in the know on what’s happening with your new home. While you won’t necessarily need a real estate agent, having one on your side can help if there comes a need for any negotiations with the contract, appraisal, etc.
How long does it take? If a building permit has not already been purchased, once you’ve put a contract on a new build, it typically takes about six weeks to get a permit. However, in many new developments going up, the builder has already purchased permits for all the homes to be constructed. Once construction begins, it takes on average five to six months to complete a home, depending on how customized it will be. If you can’t wait that long, most builders hold an inventory of move-in ready homes that are available for purchase.
What’s the first step? Before you get into selecting the details of your home, talk to a home mortgage expert who can let you know what you can afford. Getting prequalified at the beginning of your home search is a wise first step, as it will give you an idea of home size, type and location you can afford. Using a home affordability calculator can also help you determine the price of a home that fits your budget.
How do I finance a new home? This can vary depending on your situation. In some cases, buyers will need a construction loan to finance the construction, and then financing to cover the mortgage. In other cases, the buyer only needs to finance the mortgage after the home is completed. The builder and your home loan expert will let you know exactly what you need to finance your purchase. Most of the common loan types (VA, conventional, FDA, USDA) still apply to a new construction home, but because most approved home loans expire after 90 days, you should expect to submit all of your paperwork twice — first at the time of application, and again about 60 days before closing. During that time in between, it’s absolutely essential that you pay all bills on time and avoid making any major purchases that may change your financing situation.
There’s nothing quite like buying a new home, but the process can be unsettling and may even feel a bit risky, especially when it comes to financing. To give you peace of mind during the process, get your financial documents squared away with a trusted mortgage lender early on. Your PrimeLending loan expert will walk with you through the process from pre-qualification to close and will let you know when updated documentation is needed.