At first glance buying a new home might seem like a no-brainer. After all, buying a new construction home is a home that is still under warranty and you can enjoy all the benefits of a new home. But buying a new construction home comes with some challenges that you might not have thought about. Read on to find out the 5 things you need to know about buying a new construction home in Effingham County and Savannah.
1. The Financial Side Is Different
Yes, when buying a new construction home in Effingham County and Savannah or anywhere else, you still need to get pre-approved first. “Before your builder will begin building your dream home, they want to make sure that you have been approved for a loan. They don’t want to get to the end of the building process only to find that you can’t secure financing, forcing them to have to search for someone else interested in buying new construction.”
But you may not be aware that the loan process is different for a new construction home. You won’t be applying for and getting pre-approved for a mortgage. Rather, you will have to secure a home construction loan. “Unlike a mortgage, which releases all of the funds at once, these loans are released to the builder in increments (called draws). Once your home is complete, the home construction loan is rolled into a regular 30-year mortgage.”
In addition, not all lenders offer these loans because nothing yet exists to secure the loan – the “collateral, the home, is not yet built.” And lenders who do offer these loans will likely have stricter lending requirements than they do with a straight-up mortgage.
2. Be Prepared to Put 20%
Buyers have many options for buying an existing home with a down payment of less than 20%. But with a new construction home, that is very rarely possible.
“It’s possible to buy an existing home without making a 20% down payment. But when you buy new construction, you may need to put down 20% or even more.” Here’s how one buyer explains her experience: “When we bought our home, my husband and I were required to put down 20% on our home’s purchase price, even though we both had excellent credit scores. This was required to give the builders more of a guarantee that the deal wouldn’t fall through.”
If you’re considering buying new construction, contact an Effingham County and Savannah agent at (912) 695-6932 to find out what you should expect with respect to down payments in your area.
3. The Model Home Isn’t Standard
Also, if you’re going to buy a new construction home, you will probably tour a model home (or more) at some point. You need to keep in mind that all the features you see in the model home are not standard.
A model home is basically an interactive showroom outfitted with all the premium upgrades to entice buyers. They are intended to display all the customization a builder offers and to allow potential buyers to fully experience a home’s design potential. But you won’t get all that in a standard model/
The model home’s features aren’t reflected in the base price. Base sales prices are commonly based on construction with “builder-grade” options, which are of lower quality and not the premium materials and finishes you see in a model home. So if you want those bells and whistles, be prepared to pay a lot more.
4. You Should Still Get an Inspection
Many people who buy a new construction home assume that an inspection isn’t needed because the builder is reputable and the home is brand new. But this can be a costly mistake because even new construction can have structural issues. So you should still get an inspection done by a licensed professional before closing.
Yes, builders take care of city and county inspections, and they usually have their own third-party quality-control company look things over. But this is not the same as a bona fide inspection and does not replace an inspection by a licensed professional.
Your inspector will verify that everything is up to code and that none of the work is subpar. If the inspector does find any problems or issues, she will include that in the inspection reports. You can then take the report to the builder and negotiate fixes for the problems.
5. And You Still Need an Agent
On the face of it, buying a new construction home would seem to obviate the need for an agent. It’s all so straightforward, and the home is brand new, right?
Nevertheless, industry experts recommend that you hire an agent early on. “The salesperson who is discussing features, upgrades, and pricing with you actually works for the builder and is there to represent them. You need [an] agent who will have your best interests in mind when buying a new construction home.”
Not only can your agent help you negotiate a better deal, but she can help you understand the contract (which is very different from a contract for an existing home) and the many builder’s warranties. “Your agent can also help you if there are any delays in construction, problems with inspections, or if you want to negotiate upgrades to the standard features.”
Thank you for reading this blog about how I can help you buy a new construction home. I’m always excited to share my knowledge with my readers and help them make the best decisions for their real estate purchases. If you have any questions at all, please feel free to contact me at (912) 695-6932.
