How to Buy a New Construction Home

Buying a new construction home differs significantly from purchasing an existing property. New builds often feature modern layouts, up-to-date technologies, and the opportunity to personalize aspects of the home. Buyers also benefit from new systems and appliances.

Initial Planning and Research for New Construction

Unlike existing homes, new builds involve longer timelines and different payment structures throughout the construction process. This requires a different approach to financial planning and engagement with builders.

Researching builders is an important preliminary step. Investigate a builder’s reputation, assessing their past projects and financial stability. Online reviews, local building association affiliations, and visits to other communities they have developed can provide valuable insights into their quality of work and customer satisfaction, ensuring confidence in their ability to deliver a quality product.

Financial planning for new construction involves specific considerations. Understanding deposits, particularly earnest money, is important. Earnest money for new construction typically ranges from 1% to 10% of the purchase price. This deposit demonstrates a buyer’s commitment and is usually applied toward the down payment or closing costs.

Financing options for new construction include traditional mortgages and specialized products like construction-to-permanent loans. A traditional mortgage is typically secured once the home is complete, similar to an existing home purchase. In contrast, a construction-to-permanent loan finances both the construction phase and converts into a long-term mortgage upon completion, potentially incurring only one set of closing costs. During the construction phase, borrowers often make interest-only payments.

These construction-to-permanent loans typically require a larger down payment, often 20% or more, compared to the 3% to 20% common for traditional mortgages. Lenders also often require higher credit scores for these types of loans. Pre-approval tailored for new builds is recommended, as it clarifies borrowing capacity and signals seriousness to builders.

An independent real estate agent, often called a buyer’s agent, advocates solely for the buyer. While builder sales agents represent the builder’s interests, a buyer’s agent’s expertise is invaluable in understanding contract nuances, negotiating terms, and navigating the new build process.

The commission for a buyer’s agent in new construction is typically paid by the builder, meaning there is often no direct cost to the buyer. A buyer’s agent can assist with obtaining incentives, negotiating upgrades, and ensuring the buyer’s interests are protected throughout the transaction.

Engaging with the Builder and Customizing Your Home

Direct engagement with the builder often begins with visiting model homes. These furnished homes showcase the builder’s craftsmanship, standard features, and potential upgrades, allowing buyers to explore different floor plans and visualize how various design elements come together.

Sales representatives in the builder’s sales office provide details on available lots, floor plans, and pricing. It is important to distinguish between standard features, which are included in the base price, and available upgrades, which incur additional costs. These upgrades can range from structural modifications like additional rooms to aesthetic choices such as premium countertops or flooring.

Formalizing the purchase involves reviewing and signing a new construction purchase agreement. This agreement outlines the terms of the sale, including the purchase price, construction timeline, and financing contingencies. Unlike resale home contracts, builder agreements often contain specific clauses that protect the builder, such as provisions for delays or material changes. It is advisable to have an attorney review these contracts to understand all terms and conditions.

Earnest money is part of this agreement and demonstrates commitment. Builders may also require additional deposits for specific upgrades or custom selections. These deposits for selections are often non-refundable, as they commit the builder to ordering specific materials.

The design center experience is where buyers personalize their new home. Here, buyers choose finishes, fixtures, and structural options from a curated selection. This process directly impacts the final cost and the construction timeline, as extensive customizations can lead to higher prices and longer build periods. Each selection is documented, and changes after a certain point may incur change order fees or not be possible.

Managing the budget during the design phase is important, as upgrade costs can accumulate rapidly. Buyers should prioritize selections that are difficult or expensive to change later, such as structural modifications or extensive flooring. Careful consideration at the design center helps ensure the final home aligns with both aesthetic preferences and financial parameters.

Monitoring the Construction Process

After the purchase agreement and design selections are finalized, the physical construction of the home begins, typically progressing through several distinct phases. The initial phase involves site preparation and laying the foundation. Following this, the framing phase erects the skeleton of the house.

Subsequent phases include the installation of mechanical systems, such as plumbing, electrical wiring, and heating, ventilation, and air conditioning (HVAC) ductwork. After these systems are in place, the home is typically insulated, and drywall is hung, transforming the interior spaces. The final stages involve installing finishes like flooring, cabinetry, and paint.

Throughout these phases, independent home inspections are highly recommended. A pre-drywall inspection, conducted after framing and mechanical systems are installed but before drywall covers them, allows an inspector to assess the structural integrity, electrical wiring, and plumbing. A final inspection before closing is also crucial to ensure all work is completed according to plans and local building codes.

Effective communication with the builder’s project manager or construction team is important during the build process. Regular updates can keep buyers informed of progress and any potential delays. Addressing issues or concerns as they arise, rather than waiting until completion, can prevent larger problems and ensure they are resolved efficiently.

Completing the Purchase and Moving In

As construction nears completion, the final steps include the final walkthrough and understanding the builder’s warranty. The final walkthrough, typically conducted a few days before closing, is the buyer’s opportunity to inspect the finished home for any defects, incomplete work, or items that deviate from the contract. This is the time to identify any issues and create a “punch list” of items the builder must address before closing.

The builder’s warranty provides coverage for various components of the new home. While specific terms vary, warranties typically cover materials and workmanship for a period, and structural defects for a longer period. Common exclusions might include homeowner-caused damage or normal wear and tear. Understanding the warranty document, including the process for submitting claims, is important for future reference.

The closing process for new construction is similar to that of an existing home, involving final paperwork, funding, and the transfer of ownership. Buyers will sign numerous documents, including the mortgage agreement, deed, and settlement statement. Funds are then transferred, and the buyer receives the keys to their new home.

After closing, transfer utilities into the new homeowner’s name, including electricity, water, gas, and internet services. Settling into the new home involves familiarizing oneself with the home’s systems, such as HVAC controls and appliance manuals.