When most people think about buying a home, they are actually envisioning the process of buying an existing home. But purchasing a new construction home can be a much different process. Not sure how? Here are three key differences between traditional home buying and buying new construction.
1. Loans Differ
When you buy an average existing house, you get approved for one standard mortgage. But new construction has different phases that may have specific lending requirements. If you're having the home built, you may need a construction loan to cover the materials and work done before the property is actually certified for occupation.
Beyond that, large, modern construction projects may then need to seek out a jumbo-size loan. Other home buyers will then focus on shopping for lenders who work with the new construction market.
2. Negotiations Differ
Used home buyers generally negotiate largely over price. You want the lowest price possible or the most closing costs (or other financial elements) paid for. But new home negotiation is less about price and more about amenities. That's because a builder must make a certain profit margin to pay for their costs. So they may not be able to accept a low-ball offer and instead arrange to add value to the home.
New home buyers should consider what their biggest priority for upgrading materials or appliances is, whether it's adjusting the floor plan or adding luxuries. Rather than stretching your budget when you shop and hoping for a deal, look for a home within your current budget — but one in which you can identify specific elements you'd like to improve.
3. Home Tours Differ
When you buy a standard home, you can walk through it and have it professionally inspected before getting your heart set on it. However, depending on where it is in the construction process, a new home may be either partially built or completely theoretical when you commit. You may have a model home to work from, but this may not completely reflect your version.
Because the actual home is not all laid out for approval, the buyer should make sure they fully understand what features will look like and be made from. Obtain and familiarize yourself with a guarantee and a written contract. And the home will need an inspection once construction is completed.
When you approach the prospect of buying a new home from these unique angles, you're sure to have a more successful and enjoyable home-buying process. Want to know more? Start by meeting with a real estate agent who can find new homes for sale.