Honesty is a first good step in buying a newly built home.
Builders will work with applicants who disclose they won’t yet have the full deposit in hand at contract signing.
Honesty will also allow soon-to-be homebuyers to approach the home-buying process with a clear vision about what’s possible.
If you’re thinking about purchasing a new construction, here’s some good news: the process for financing a new home is similar to purchasing an existing home.
Homebuyers should also understand the steps of a down payment, deposit and closing costs will vary compared to buying an existing home.
For example, builders will require a deposit at the time of entering a contract. The amount will depend on the sales price and type of loan.
Don’t have the full amount being asked? No worries. Builders are, generally, willing to work with prospective buyers and negotiate both the amount and timing of the deposit. In some cases, homebuyers may be able to make the payment in two installments.
Getting deadlines clearly spelled out is extremely important when homebuyers agree to this arrangement. The second payment will typically be due as soon as the builder breaks ground on the new home.
Buying a newly constructed home gives homebuyers an opportunity to have a say in its design. Applicants will pay for these options, which are nonrefundable.
These options will impact the appraisal process. That is why buyers should carefully read the sales contract to get a clear view of the home’s value, which is needed during the appraisal and mortgage-approval process.
If the home appraises at the base value excluding the upgrades, then the borrowers will have to pay out of pocket. This is an expensive predicament since the cost will not be spread over a 30-year period of time in the mortgage.
On the other hand, the home could also appraise at the base price with everything included. In this case, the borrower will feel pretty good about making the additions.
In some ways, the down payment for new builds will be the same as financing an existing home. First-time buyers may pay a small amount for a down payment. Veterans may not have to pay one at all. The difference lies in qualifying for a new home loan – which may be a little more difficult and will likely require mortgage insurance.
Again, the details will be drawn out in the contract and it’s important to review those carefully. Working with a real estate professional who is familiar with the new home purchases will go a long way as you embark on this exciting journey of new homeownership.