What to Know About Buying a New Construction Home
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Buying a home in a competitive market is like being in a gladiator ring. Multiple rounds of showings and bidding wars can leave you feeling defeated.
If you’re growing weary of wading through an insufficient inventory of existing homes, you might want to consider buying a new construction home.
The number of single-family homes constructed is expected to rise in 2021, though at a slower pace than the previous year, according to the National Association of Home Builders. Builder confidence in the market for single-family homes hit a record high in November 2020, and though it receded a bit by the end of 2020, the NAHB forecasts that the construction of residential homes will be a key element of the economic recovery this year.
More new construction homes for sale may mean less competition in your market. If you're tired of sitting on the sidelines, here are four things to consider when buying a new construction home.
You get to customize your home
Not all of us are blessed with an interior designer’s touch. When buying a new construction home, you may be able to choose a floor plan, housing lot, type of community, expert-selected features and more, so you don’t have to agonize over an extensive remodel to get the house of your dreams.
While marble countertops or hardwood floors can make your new construction home look fabulous, high-end finishes and upgrades can add to your final price tag. If adding extras is cost-prohibitive, you can always plan to upgrade certain parts of your home down the line.
You might get builder incentives
Believe it or not, there’s a bit of flexibility in the negotiation process with a builder. While you may not be able to get a discount on the purchase price of a new construction home, you may be able to negotiate for material or structural upgrades.
Some builders may also try to sweeten the deal by offering to pay closing costs, initial mortgage payments, property taxes, insurance premiums or homeowners association fees for a certain period. If you don’t see incentives advertised, ask about them. Don’t assume that they’re not available.
You might get a builder warranty
Warranties vary from builder to builder, but they'll generally cover the workmanship and materials for things like windows or the heating and cooling system for a specific amount of time, often one year. Warranties also typically specify how the repairs will be made.
Find out what the builder warranty covers — and how long it lasts — to make sure there aren’t any surprises. New homes typically come with a builder warranty to cover common post-construction issues that the builder is responsible for correcting.
» MORE: Buyer home inspection checklist
You can finance through the builder — or any lender you choose
Some builders provide a one-stop shop for you to customize and finance a home directly through them, or through a preferred mortgage lender.
A few things to keep in mind about new construction financing: Some lenders offering new-home loans might also require higher down payments, an excellent credit score and consistent payment history. Additionally, if you get outside financing, your lender will check your builder’s credit and background to assess its level of risk in case the builder bails on the contract.
» MORE FOR CANADIAN READERS: How to buy a new-build house
