Hey everyone, it’s Nicole Nark and welcome back to my blog. Today I am going to teach you the 10 steps to buying a new construction home.
So if you’re looking to buy something like a DR Horton, a Lennar, or even a home being built from a local builder in your area, this article is for you. So let’s get into it.
1. Get pre-approved for a home loan
The first step to buying a new construction home is to get pre-approved for a home loan. Now, you may be thinking, “Nicole, I get it. I need to figure out how much I can afford.” Yes, but it’s so much more than that when you’re considering buying new construction.
As you tour new construction homes, you may hear about a preferred lender. Oftentimes, builders have preferred lenders that they’re going to push you to work with. Now, I’m going to encourage you to do the best thing for you financially and shop around for your mortgage.
Just because the builder has a preferred lender does not necessarily mean that they will offer you the best financing terms. So, you’re still going to want to shop around for a mortgage.
Keep in mind that you can use all of your same common loan types when you’re buying new construction homes. This is not a custom home. You don’t have to go out and get a construction loan. You can look at things like an FHA, VA, USDA. Or even a conventional loan for your purchase of new construction.
Here is some personal advice
Now, the last thing I want to mention is kind of an insider secret. This is something that I’ve learned as I have helped my clients buy new construction homes.
When you are comparing different loan types and different lenders, keep in mind that:
- As soon as you go under contract, a lender is going to want you to lock in your interest rate.
Depending on the timeline of when your home is going to be completed, if it’s new construction, that may exceed a 30-day rate lock period.
So, you want to ask your lender if they have extensions on rates for new construction homes. And if that is something that is included with your loan or if that could come at an extra cost to you. There’s no reason for you to be paying extra money to lock in your rate for your home being built.
Ask your lender if they have a float-down rate option. If you do happen to lock in your rate and while you are under contract and your home is being built, rates were to drop, they would allow you to take on that lower interest rate.
A lot of times when you are locked in with a lender, they may not allow you to do so, or they may charge you fees to drop down to that lower rate. So definitely look into a rate float as well.
2. Hire a realtor to represent you
The second step is to hire a realtor to represent you. The main reason this is important is that if you were to walk into a model home in a new construction community and talk to the agent sitting there, that agent represents the builder in most cases. They’re not there to represent you and your interests alone.
Now, that doesn’t necessarily mean you shouldn’t work with that agent. But just keep in mind that they would be a dual agent if you did choose to work with them.
One of the significant advantages of working with a realtor, when you decide to purchase a new construction home, is that realtors know how to guide you through the process. This is to ensure you don’t, you know, go astray.
They may also be aware of communities or developments that you haven’t heard of, which might fit your price point and exactly what you’re looking for. So, you can rely on your agent’s knowledge of new construction to assist you in your home search.
Keep in mind that usually, working with this buyer’s agent doesn’t come at a cost to you since builders typically pay for your realtor’s commission.
3. Start house hunting
Once you are pre-approved and have hired an agent to guide you through the home buying process, the next step is to start house hunting. This is the most enjoyable part, but I want you to keep two crucial things in mind.
Firstly, as you go house hunting, make sure that either you or your agent is asking builders about the expected timeline of completion for these new construction homes.
Keep in mind that if they haven’t already received their certificate of occupancy, this process could take longer than 30 days to finish. This is essential, especially if you are testing the rate lock with your lender.
Be aware of model homes
Additionally, you’ll want to remember that model homes you may visit are upgraded versions of the standard homes. When you walk into a model home, the builder’s goal is to sell you on that home and the lifestyle their community offers. This is a great thing, but keep in mind that these are upgraded homes.
They may have accent walls, upgraded lighting packages, or even enhanced landscaping, to name a few things. The home you see as the model may not be exactly what your home will look like. Even if you buy the same floor plan, it might not be the same unless you choose to pay for those upgrades.
Once you find a home you like, your next step is making an offer. Keep in mind that this is somewhat different from buying a resale house. Typically, when builders list their homes for sale, the advertised price is what they expect to receive.
So you may not need to offer above the list price to secure the home. However, builders may expect you to put down a certain dollar amount as earnest money, which will be applied to your purchase when you close on the house.
4. Two set of contracts
When making an offer on a home, be aware that there might be two sets of contracts to sign. Of course, there will be state contracts used in any home purchase. But in many cases, the builder may also have specific contracts for you to review. Ensure that you read these contracts carefully.
In addition, these contracts will outline your inspection period and how any desired changes to the home would be handled.
So, if you’re ready to buy a new home for yourself, be sure to check out this link. There, I will help you get connected with someone who specializes in new construction in your area.
As you’ve learned from this video, there are several steps to navigate. And some valuable pro tips that you can learn from your agent along the way.
5. Get a home inspection
The next step is to get a home inspection. Keep in mind that you may not want schedule the home inspection immediately after going under contract. This because you might want the home to be a little more completed by the time you conduct the inspection.
However, there are a few things you’ll want to watch out for, and a home inspector will know exactly how to inspect a brand-new construction home.
One essential thing to understand, even as someone who builds new construction homes, is that no home, even a brand-new one, is ever perfect. So don’t be alarmed if your home inspection reveals some issues.
Keep in mind that a builder is not always present inside the house when their subcontractors are working on it. Additionally, city inspectors don’t inspect every single outlet or light switch to ensure they work before passing an inspection.
These are all the things that your home inspector will examine, and it is definitely worth the investment, even for a new construction home.
6. Don’t be the cause of a headache for your builder
Buying a new construction home is super exciting, and the process is quite straightforward, pretty much the same as buying a resale home. However, I want to caution you not to get too carried away with excitement and potentially cause headaches for your builder.
If you go under contract on a new construction house, avoid visiting the job site every single day. It may surprise you how often I receive phone calls from my clients who want me to meet them at their new house while it’s being biult..
Of course, it’s reasonable to be excited and a visit a few times during your transaction is normal. However, avoid becoming a constant presence or “stalker” at the site every day.
This not only benefits your realtor but also the contractors working on your house who are trying to complete their work efficiently.
7. Create a punch list of repair items
After you have the home inspection, you should proceed just as you would when purchasing a resale home. That means by creating a punch list of repair items.
While there probably won’t be much, you’ll need to compile a list so that the builder knows what you would like to have fixed or touched up before your closing date.
Typically, these items will be addressed a few days before your closing date, allowing you to conduct your final walkthrough.
8. Let the lender know that you can have the home appraised
Once you have completed the inspection, and you’re about two to three weeks away from closing on your home, you’ll want to inform the lender that you are ready to have the home appraised. However, be cautious not to order your appraisal too early.
If the appraiser goes out to the home and sees that there are no floors installed yet, or perhaps there are no light switch covers or handrails, they will add these as necessary items that must be completed before your home can close.
Keep in mind that if the appraiser has to make additional visits to check for these items prior to closing, there will be an extra charge for that. So, be sure not to order the appraisal too early to avoid unnecessary costs.
9. Secure home insurance
One of the last things you’ll do as a buyer is secure home insurance. The great thing about buying a new construction home is that usually, your home insurance premiums are lower than if you were to buy a resale home.
This is because everything is new, and if there’s one thing I know about being in this business, it’s that insurance adjusters love it when you have a brand new roof. This keeps your premiums nice and low.
The day before closing, or perhaps a few days before, you’ll return to the house to conduct a final walkthrough. This is when everything becomes very exciting. By this point, your loan is probably clear to close, and you’re just going through the home to ensure that everything on your punch list has been completed.
10. Going to closing
The last step in buying your new construction home is the closing. Depending on your state, you may be heading to either an attorney’s office or a title company for the closing. During this process, you’ll sign a bunch of documents and bring the money required to cover your closing costs and down payment.
It’s important to remember that it is your right to choose your title company or closing attorney. So, don’t feel pressured to use the title company preferred by your realtor or builder. You have the freedom to select whomever you want for this process.
If you’ve made it through these 10 steps, you have officially purchased your new construction home. This is an exciting time, and you can start the process of activating utilities, moving in your personal belongings, and transforming your new construction home into your own space. Hopefully it will be looking just like the model.
In conclusion
If you have any additional questions about buying a new construction home, please let me know in the comments below. I am happy to answer them.
Of course, if all of this sounds great to you, and you can’t wait to get your hands on a new construction home yourself, click on this link where you can contact me directly. I can help you get matched with an agent who specializes in new homes in your area.
I’m Nicole Nark, providing articles and videos to assist you in finding your way home, possibly to a new construction.
See you in the next article or video.
