X

Mortgage rates are down! It may be a good time to refinance, or learn the income you need to buy a median-priced home in the top 50 metro areas!

Mortgage rates are down! It may be a good time to refinance, or learn the income you need to buy a median-priced home in the top 50 metro areas!

Buying New Home Construction: 8 Tips for Getting it Right

high-end-tract-homeBuying new home construction -- is it making a fresh start or a journey into the unknown?

It's actually both, but with some effort and planning you can limit the unknowns. You want the benefit of a brand-new home you can customize to your specifications.

See today's mortgage rates

Here are some steps you can take to manage the unknowns of buying new construction:

1. Check the home builder's reputation

If you purchase a home that's new or still under construction, you'd better consider the builder's reputation. Check out past projects. Visit those neighborhoods to see how the properties have held up. It's great if you can find older developments to look at. If possible, chat with homeowners to find out what their experience with the builder was like and how the home has held up.

Also, check out online forums and your local Better Business Bureau to see what you can find out about the builder's reputation. You can also contact your local contractors board to see if there are complaints or disciplinary actions against the builder.

2. Remember who the agent represents

Most real estate agents get their commissions from the seller. And in any case their incentive is to close the deal. They might find you the right property and give you some sound advice. But rely on yourself when you choose a property and negotiate with the builder.

This is especially true if you're dealing with agents marketing a development for a builder. They are sales agents, not objective third parties.

Related: Are You Ready to Build a New Home?

3. Don't take the home builder's list price at face value

Just because you're dealing with a property developer and not a homeowner doesn't mean the price isn't negotiable.

If the builder has multiple properties on the market, find out how many are unsold and how long they've been on the market. The more properties home builders have on their hands, the more apt they are to make price concessions.

4. Look beyond the builder's recommended lender

The builder may offer to arrange financing for you. That might prove helpful, but do some comparison shopping of your own.

The builder might have a financial incentive to steer you to a particular lender, so don't assume that's the best deal. Listen to what the builder's lender has to offer, and then do your own research to see if you can find better mortgage terms.

5. Leave yourself a cushion of time and money

If you're buying a property that is not yet built, do yourself a favor and expect it to take longer and cost more than quoted. Most construction lenders build in a 10% contingency for just that.

When you talk to people who've gone through the experience of having a home built, you'll find the phrase "on time and under budget" almost never comes up. Assume the build will take longer and cost more than you expect. You might avoid having to arrange temporary housing while your new home is finished or coming up with more money on short notice.

6. Buying new construction: up-charges and options

Minimize financial surprises in the home-building process. Clarify upfront which items the builder's standard package include, and which entail up-charges for optional features or materials.

Try to get all these options laid out for you before you commit. Costs tend to creep up when homebuyers have to make choices during the process. What feel like relatively minor cost additions can add up to big bucks over time.

Related: Is it Better to Buy a New or a Used Home?

7. Check new home construction documents

The builder may present you with its standard form of agreement, but that standard form was written to protect the builder, not you. Have an experienced real estate attorney review the documents before you sign.

8. Hire your own home inspector

You might think a home inspector unnecessary for new property, but new construction can have as many defects as an older home.

Even the best home builders experience time and financial pressures that may cause them to cut corners. Don't settle for the builder's assurance that the property has been inspected. Get your own licensed home inspector to make sure the work is sound.

If you like the idea of buying a brand-new home, you don't necessarily need a builder start from scratch. Many develop housing tracts or construct individual properties "on spec" before they put them on the market. That can give you a chance to be the first to own the home, but still see in advance what you're getting into.

Compare mortgage programs now

Connect with Lenders
Connect with Lenders
Find Our Best Mortgage Rates
I need a loan for:
No Comments
Leave a Comment