Purchasing a new construction home is an exciting process as you watch your dream home come to life. Many of the steps in purchasing a new construction home are similar to purchasing a resale, such as signing a contract and securing a loan. However, since the home is new, there are a few additional steps to not only finalize the sale, but also to make the home your own such as selecting options and meeting with the builder for walk-throughs during various stages of the building process.
While the processes will vary by builder, below are 6 general steps of the purchasing process for new construction homes and what they mean.
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Once you have decided on which home/homesite to purchase, you will need to enter into a contract with the builder. Some builders may take lot hold reservations, while others may not and will go directly to the purchase agreement. The purchase agreement is often a long document so be sure to take the time to read it thoroughly before you sign. Once both parties have signed, it is then called a ratified contract, by which the builder and purchaser are now held accountable. A financial deposit is typically required at this stage. The deposit may be split into two-an earnest money deposit and an options deposit.
2. Securing a Loan
Before the contract is signed, you will either need to have pre-approval for a loan or show that you can cover the cost of the home with your current assets. Builders often have preferred lenders who they frequently work with, who understand the process and can provide competitive rates. Potential benefits of working with preferred lenders include possible closing cost benefits and better communication among all parties. An added benefit of purchasing a new construction home is that lenders may offer to lock in rates for longer terms. If interest rates are expected to go up over the coming months, your loan will be secure until your closing date months down the road.
3. Options Meetings
Part of the fun and excitement of buying a new home is selecting options and designing the home with your preferred choices of flooring, cabinets, countertops and more. As your home is being built, you will meet with the builder to select the options you would like in your home. This includes structural options (such as changing an open study to a bedroom) and finish options (such as color and type of cabinets and countertops). Click here for more information on selecting options.
4. Home Walk-Throughs
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. Take “inside the walls” pictures or video during your pre-drywall walk-through so you know where there is extra blocking, wiring, pipes, etc. for when you begin to hang TVs and artwork. Inspectors should visit the home in the pre-drywall stage so the pre-drywall walk-through is a good time to review the inspector’s report with the builder. The pre-settlement walk-through is similar to a final walk-through of a resale purchase and is your last opportunity to point out any potential issues before closing.
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5. Closing
At last, your new home is ready and the final step is the closing process! Closing typically takes place at the office of a title company. The title company ensures the 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 the requested items.
6. Warranty Services
One additional benefit of purchasing a new construction home is the warranty services. A walk-through is typically performed several months after closing to check in with the homeowner and address any issues. Although it will vary, typical builder warranties offer one to two years of coverage on materials and workmanship and up to 10 years on structural elements.
Tips to help the purchasing process go smoothly:
Do:
- Stay in regular communication with your builder
- Come prepared to meetings with any questions
Don't:
- Delay meetings, walk-throughs, and options selection as it could delay the construction timeline
- Make other big purchases (such as a new car) before you close on your home
- Change your job before you close on your home
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.
For more guidance and tips on purchasing a new construction home, check out our comprehensive guide to new construction. Complete with helpful resources, tips, and information to help you make the right decisions for you and your family.
