Your 11 Step Guide to the New Construction Home Buying Process
Jun 13, 2019
Buying a new build home can be an exciting life decision – but it may be challenging to know where to begin or what to expect. The new construction homebuying process involves more than paperwork and keys. This guide breaks down the pros and cons of buying a new build home, the new home construction process, common mistakes to avoid, and tips to make the process as smooth as possible! Let us help you determine if buying a new construction home is worth pursuing.
Table of Contents
Step 1: Decide what type of new construction is for you
Step 2: Research different homebuilders and choose one for you
Step 3: Research various neighborhoods
Step 4: Explore different mortgage lenders
Step 5: Understand the purchase agreement & contracts
Step 6: Choose your home’s floorplan
Step 7: Select design features
Step 8: Establish a living situation in the meantime
Step 9: Review warranty documents
Step 10: Time for final walk-through
Step 11: It’s closing time
Pros of Buying a New Construction Home
Cons of Buying a New Construction Home
Tips to Help the Process Go Smoothly
Common Mistakes to Avoid During the New Construction Home Process
Additional Homebuying Resources
Steps to Buying a New Construction Home
Step 1: Decide what type of new construction is for you
There are multiple ways to go about buying a new construction home; this could mean a custom-built home, a buildable home plan where you can personalize your options, or an under construction or quick move-in home, and more. Let’s jump into some specific types of these new construction homes!
Buildable Home Plan
A buildable home plan is where a builder provides set floor plans for buyers to choose from. The structure of these homes is usually not changeable and personalization options vary based on the buying stage. For example, if you are early in the process, you may be able to choose the home site, the floorplan, and design options. If the home is already under construction (see inventory home below), these things might be already chosen, and you’ll pick the home that fits you best.
Inventory Homes
Inventory homes, also referred to as ‘speculative’ or 'spec' homes are homes that have started construction which may mean they can close faster. These homes work well for someone who wants a new home but doesn’t want to wait as long for it to be built and is okay with a designer selecting the options within the home such as cabinet and countertop color and style. personalizing In this type, you may not be a part of the design process, have input on the materials used, or select features. However, this is a brand-new home, and you’ll be the first to live there and may be able to do so faster than a new build home on a dirt lot.
Semi-Custom Homes
Semi-custom homes are thought of as the in-between of a buildable home plan and a custom build. You’ll buy the lot and will choose from existing floorplans the builder offers. In this process, you can usually select some structural changes and add-ons to the floorplans like an RV garage or casita. You will also choose finishing touches and materials on the interior based on what the builder has available.
Custom Homes
With custom homes you are building from the ground up, these homes are completely customized by you. You’ll work with a homebuilder, possibly an architect, and design and plan every detail of this construction. These homes work best for someone who wants to customize every detail from layout to finish and are usually “dream homes.” This route, on average, is the most expensive and requires an extended timeline.
Step 2: Research different home builders and choose one that works for you
When choosing a home builder, you’ll want to pick one that is best for you based on the type of home you want since not all builders offer each home type mentioned above. You’ll want to make sure the homes available match your needs and wants. When researching, think through these needs and wants so you can look at builders from this lens. Look to friends and family for their experiences with building, living in an area you are looking to move to, etc. When looking at builders, view their previous developments, tour model homes, read reviews, and ask questions if you have them! Consider the factors below when examining builders:
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Where do they build?
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What is their level of quality?
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What types of floorplans do they offer?
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Do they have an affiliated mortgage company?
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On average, how expensive are their new construction homes?
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Will there be HOA dues associated with my new home?
See more of our tips for choosing the right home builder.
Step 3: Research various neighborhoods
Location, location, location! When it comes to buying a new construction home location is just as important as the home itself! Explore the surrounding area and neighborhood – visit restaurants and entertainment options, talk to neighbors and see if you could picture living there. Remember to keep in mind your lifestyle; this could include work commute, school districts, store proximity, etc.
Step 4: Explore different mortgage lenders
When building a new home, you’ll need a home construction loan, so you’ll want to work with a lender that’s familiar with new construction. Look for good rates and reputation, understand the loan features, and overall, what fits your situation the best. Note that some of these loan types will not be available with all builders depending on the type of home you are buying.
Some common types of loans include:
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Construction Loan: These are usually short-term funds used throughout the construction timeline. Once the construction is complete, these loans can convert to a long-term 15 to 30-year loan, or you’ll have to get a separate mortgage loan – it depends on the lender.
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Builder Financing: Sometimes, builders will have their own financing; however, this may only fund the construction portion, so look at all your options. Additionally, some builders work with specific lenders to get you better rates. See Shea Mortgage for example.
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Bridge Loan: These are used to “bridge” the gap between your previous and new home. It’s a temporary loan that accesses your existing home’s equity before it sells. This allows your lender to advance your money for a set time. These loans can be risky determining on when your home sells.
Step 5: Understand the purchase agreement & contracts
When it comes time to view and sign the purchase agreements and contracts, make sure to gain as much clarity as possible, like what will happen if there are construction delays or supply shortages. Take your time and make sure you read your disclosures as well, as these provide information related to the community and its surrounding areas.
Step 6: Review warranty documents
When it comes to warranties, it’s important to know what is covered. There may be different coverage terms and durations for functionalty, fit, finish and structural items. It should be clear what the builder is responsible for fixing, the time of the warranty, and how the homeowner should dispute the issues.
Step 7: Choose your home’s floorplan
Depending on which style of construction you select, your floorplan process will vary. For custom homes, you’ll be able to alter everything about a floorplan. For tract and semi-custom homes, you’ll pick from a selection of floorplans available through your builder, with most builders offering a variety of styles and sizes. When choosing, select a design that fits your lifestyle – do you need a flex space, open kitchen, etc. If available, look at model homes to get the feel for the floorplan in real life.
Step 8: Select design features
Now you’re at the fun part – design time! This stage is where you’ll get to start personalizing things within your home, which can range from paint colors, cabinets, flooring, countertops, light fixtures – the list goes on! At this time, you’ll also be able to choose any upgrades that your builder offers; keep in mind these may come with an extra cost. It’s important to make decisions based on what you want and like. At the end of the day, loving your home is the most important -- so make it what you want!
Get more details on how to personalize your home with our Shea Homes Design Studio.
Step 9: Establish a living situation
Building a new construction home can be a hectic process; add having to sell or handle a lease, on top of moving, can make it harder. If you need to move out of your current home before your new home is ready, consider looking into short-term lease options and reaching out to friends and family for a place to stay in the interim! Keep your extra things in storage, that way you don’t have to constantly move them around. As the new home buying process can sometimes have longer unexpected length times, some buyers keep their current home until their new home is ready. Whichever choice works best for you, just make sure you don’t leave your living situation until the last minute.
Step 10: Time for final walk-through
This is the last time you’ll walk through your new construction home before officially taking the keys! In this walk-through, you should be checking that everything is exactly how you wanted, and any repairs or cosmetic touch-ups needed were completed. Make sure to test everything – the appliances, toilets, showers, etc. If there are any issues, raise them with your home builder.
Step 11: It’s closing time!
Time to close on your new construction home! During this period, your real estate agent will assist you with any leftover items needed to complete. At closing, your agent will go through the paperwork, get your signature, and transfer the final funds. Once it’s all signed and paid, the brand-new house is yours, and you are now a new homeowner!
Pros of Buying a New Construction Home
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More personalized options
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Latest appliances & features
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Everything is brand new
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Products are more energy efficient
Cons of Buying a New Construction Home
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The timeline can be long
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Loan process can be complex
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Decision making may be overwhelming
Read more pros and cons of new construction.
Tips to Help the Process Go Smoothly
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Communication: Have regular contact with your builder - ask questions and get progress updates.
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Come to meetings prepared: If you have any questions, concerns, ideas, etc., make sure to bring them to the meetings that you will have with your builder and discuss them openly.
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Check up on the build progress: Visit the construction site when you can. Before getting started, confirm that the home builder you are using allows owners to view their home during construction. One thing to note, many homebuilders require that you set an appointment for your safety.
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Review documents carefully: Make sure you are reading documents carefully before signing anything. Understand all the terms, costs, and contingencies.
Common Mistakes to Avoid During the New Home Construction Process
The new home construction process can be confusing at times, but this is a large commitment, and you should be in love with your house! Below are common mistakes new construction homeowners make:
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Working with the wrong builder: Make sure you get to know the builder and their work – visit their model homes and open houses. Don’t just choose a builder for the price; you want quality
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Expecting zero delays: You’ll want to have a realistic timeline. In the home construction industry, delays can be common due to bad weather, out of stock materials, and more. We know it’s exciting to get into your house, but more than likely you’ll experience some delays – build these buffer days into your personal timeline.
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Trying to cut corners in the budget: Don’t just go with a builder because they offer lower prices and a quicker timeline. Look into what this includes and why it is lower; you don’t want to sacrifice quality materials or get expenses added on that weren’t initially accounted for.
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Skipping a third-party inspection: You might think there won’t be any issues because it’s a new home, but that isn’t true. You don’t want to risk any mistakes – big or small.
