New Construction Home Buying and Building Guide
Table of Contents
STEP 1: Know What You Can Afford
STEP 2: Make a Plan for Your Current Home
STEP 3: Shop for a Mortgage
STEP 4: Find a Home
STEP 5: Customize & Sign Purchase Agreement
STEP 6: Walk-throughs & Inspections
STEP 7: Closing
STEP 8: Warranty Services
Buying a new construction home is one of the most rewarding, and expensive, decisions any of us will make. As the nation’s largest broker of new construction homes, Marketplace Homes has helped thousands of homebuyers experience the easiest way to build the home of their dreams.
From finding the right solution for your current home, applying for a mortgage, to designing your new home, understanding all of the steps is a great way to begin. Keep reading to learn the basics of how to buy a new construction home. Before you know it, you’ll have all the basics under your belt and feel more empowered about taking the next steps.
This guide contains valuable insights that include expert tips, pros and cons, and other pieces of advice for new home buyers.
Step 1: Know What You Can Afford
One of the first things you’ll need to do before buying a pre construction home is decide how much home you can afford. Take an honest look at your current income and expenses so you understand how much you can afford to spend on a new house. This tip can also help you even more if you plan to turn your new construction home into an investment in the future.
Marketplace Homes Expert Tips:
As a general rule, you want to spend no more than 30 percent of your monthly gross income on housing.
You can also shop around for deals. Since interest rates have increased, more builders are offering incentives to make buying a new construction home more affordable.
Down Payment
While many buyers may think mortgage companies require 20 percent of the purchase price as a down payment for financing, you can certainly buy a home with much less. At Marketplace Homes, our customers put an average of five to ten percent down. However, you’ll likely need to pay private mortgage insurance (PMI) when your down payment is less than 20 percent.
Closing Costs
Closing costs are the lender and third-party fees paid at the close of a real estate transaction. These usually total between 2%-5% of the final purchase price. However, many builders often offer closing costs incentives to help you further reduce that cost.
Step 2: Make a Plan for your Current Home
Once you know how much you can spend on your new home, your next step is to make a plan for your current home.
Did you know that building a new home can take anywhere from three months to a full year or longer? If you sell your current home too fast, you’ll have a double move. Sell too slow, and you’ll have double payments. For those renting, you may be stuck with having to pay the remainder of your lease term or an expensive buy-out. Marketplace Homes offers several New Construction Programs that can be customized just for you.
Guaranteed Purchase
One of the easiest ways to sell your home is directly to Marketplace Homes. No showings, missed closings, double moves, double payments, or uncertainty.
Guaranteed Sale
If you’d prefer to put your home on the market, we can help save you thousands of dollars by listing your home for a discounted commission. We’ll even include a back-up cash offer just in case your home doesn’t sell.
Marketplace Homes Expert Tip:
While keeping your current home as an investment property with guaranteed rent, you get to build equity while someone else pays!
Guaranteed Lease
Not quite ready to sell? Marketplace Homes will lease your home. We’ll find a qualified tenant, provide free property management, and pay you a guaranteed rental payment each month even if the home is vacant.
Lease Buyout
If you’re currently renting, Marketplace Homes will cover your remaining lease payments when you purchase a new construction home.
Sell and Stay
If you need cash to close and don’t want to move twice, through Sell and Stay, you sell your house to Marketplace Homes and stay in it as a renter. No more hotels, self-storage, and changing schools before buying your dream home. Just stay in familiar surroundings and enjoy the streamlined process.
Step 3: Shop for a Mortgage
Shopping for a mortgage is important because lenders will have different loan terms with regard to interest rate, fees, term, assimilation period, etc. It’s essential to pick the most beneficial loan type so you can get on an appropriate payment plan to build equity. Choose a lender who is willing to explain the pre-approval, approval, and closing processes clearly.
Pre-qualify for a Mortgage
Generally, you must establish a few things in order to qualify for a mortgage loan. For example, adequate income to support the continuing loan obligation and credit worthiness to demonstrate persistence in meeting general credit obligations.
If you are shopping without an existing home to sell, you need to bring more financial assets and guarantees, like a higher down payment, to the table. Buying a new construction house without equity is possible with proper preparation.
Pre-approval Letters
Before you’re able to put an offer on a new construction home, most builders will generally want to see a pre-approval letter. This letter tells the builder how much of a loan you qualify for, excluding the amount you have available for a down payment or have to bring to the closing table. Based on your income, expenses, and credit, a lender will provide you with a pre-approval letter for the type of loan they are willing to make.
Marketplace Homes Expert Tip:
Some builders may require a special type of Home Construction Loan or prefer you to work with their in-house lender. If that is the case, we’ll be here to help walk you through every step of the process.
Step 4: Find a Home
Once you’re pre-approved and have a plan in place for your current home, you’re ready to start the fun part! Deciding what you want in a home is not only an exciting step in the process, but one of the most important.
Research Builders & Their Developments
When you’re looking at builder’s reviews and social media profiles, pay attention to how the builder communicates with someone who bought their home after closing. A builder who stands behind their work will reach out to buyers to remedy any problems that may arise. If you want to buy on a plot of land, first check if the land is buildable to not waste any time.
If the development you’re interested in is already being built, take a ride throughout to get a feel for the neighborhood. It’s also important to check to see if the development has a Homeowner’s Association (HOA). If there is one, you’ll want to see what the annual dues and amenities are.
Marketplace Homes Expert Tip:
While many national home builders keep their websites fairly updated, it can be difficult for smaller builders to do the same level of frequent marketing. If you’re interested in a particular neighborhood, but aren’t sure what builders are there, just let us know. We often know of new developments before they are rolled out to the public, and are here to help!
Narrow Down Your Search
Once you’ve compiled a list of all of your must-haves and absolutely-nots, narrow down your list to only the top three. Give this some thought, be realistic, and share your wants and needs with your Real Estate Expert. For example, is this going to be your forever home, or do you plan to turn it into a rental investment? These plans matter with the type of home you buy.
Marketplace Homes Expert Tip:
If you’re having a tough time narrowing down, speak with your expert about what is realistic for your price range.
Step 5: Customize & Sign Purchase Agreement
You’ve made a plan for your current home, found the builder & development, and are ready to move forward.
Upgrades & Customizations
Typically, you are able to pick out the finishing touches from the builder’s selection of standard options. This means you’ll be able to select the basics, such as paint color, flooring, countertops, cabinetry, light fixtures, appliances, exterior elements, and tiling. Paint color options will usually be neutral, and flooring & lighting options are normally builder-grade.
If you aren’t a fan of any of the standard options, you can look at the various upgrades your builder offers. Keep in mind that these upgrades will increase the price of the home. If you’re not sure whether or not a particular upgrade is a good investment, your Real Estate Expert will be able to guide you in the right direction.
Make An Offer
Your Real Estate Expert will help you write an offer to purchase, and once submitted, the builder will review and accept, decline, or submit a counteroffer.
Marketplace Homes Expert Tip:
Oftentimes, there is not as much room for negotiation when purchasing a new construction home compared to resale properties. However, there may be more wiggle room on inventory or model homes that have been on the market for 30 days or more.
Step 6: Walk-throughs & Inspections
Throughout the construction process, there should be a series of walk-throughs with the builder. These may include pre-construction, pre-drywall, and pre-settlement.
Marketplace Homes Expert Tip:
Take “inside the walls” pictures or video during your pre-drywall walk-through so you know where there is extra wiring, pipes, etc. for when you begin to hang TVs and art.
Inspections & Final Walk-through
Inspectors typically visit the home in the pre-drywall stage making it an excellent time to review the inspector’s report with the builder. The pre-settlement walk-through is considered the final walk-through of the home before purchase. This is your last opportunity to point out any potential issues prior to closing. Speak up if you notice anything you want to change. Your builder wants to make sure your house will feel like home!
Step 7: Closing
At last, your new home is ready and the final step is the closing process! Depending on where your home is located, closing is typically handled by either a title company or attorney. They will ensure that your loan has been approved, all necessary paperwork is signed, and the purchaser’s ownership is recorded. There are a number of items you will need in advance (such as an insurance policy, cashier’s check, etc) so be sure to come prepared with all requested items.
Marketplace Homes Expert Tip:
Your Real Estate Expert will run through all closing documents with you prior to closing, as well as let you know what items you will need to bring to the closing itself.
Step 8: Warranty Services
One additional benefit of purchasing a new construction home is the warranty services. Another walk-through is usually performed a few months after closing to check in with the homeowner and address any issues or concerns. Although it will vary, most builder warranties offer one to two years of coverage on materials and workmanship and up to 10 years on structural elements.
Homebuilders are so essential because they provide a fresh inventory of houses for people like you and me. It is our pride to specialize in this niche to deliver you excellent results and the forever home you always dreamed of. If you want the bells and whistles, like that patio you always dreamed of, this is your time to make it happen. And we’ll be there with you for the entire process.
Whether you’re purchasing a new construction home for the first time, or for the first time in years, it’s important to understand the process and make sure all your questions are answered. In the end, if you take the time to prepare a plan for your current home and choose items that suit you personally, your new home will represent your unique style and bring you happiness for years to come.
Start the journey to your dream home today, and get a FREE custom plan made just for you!
How it Works
Step 1: Provide us your address and tell us a bit about your current situation.
Step 2: If applicable, show us your home with photos and any additional upgrades or improvements
Step 3: Within 48 hours, our Real Estate Experts will send you custom solutions tailored to your needs.
Step 4: You get to choose what solution works best for you.
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800-331-0646
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