How to Buy a New Construction Home

man in red jacket standing on white concrete building under blue and white cloudy sky during

The steps to choosing a lender, agent, and location for your newly built home 

Investing in a new construction home is an exciting opportunity to start fresh. 

Being able to customize a home from top to bottom and choose the neighborhood where it’s built makes homeownership that much more special. 

The key to making this a successful venture is to understand how the process works. 

You’ll need a step-by-step guide explaining how purchasing a newly built home is different from buying a home that’s previously owned. 

From choosing the right lender to how to handle the expense of hiring a builder, I’ve put together a comprehensive guide on how to buy a new construction home. 

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Key takeaways:

  • Builders work with three kinds of new construction homes: custom, semi-custom, and spec/production
  • A buyer’s agent with expertise in purchasing newly built homes can advise you on which home upgrades will provide you with the most value
  • Consider property taxes, zoning laws, and code regulations when choosing a neighborhood to build your new home
  • Check with the Better Business Bureau before hiring a builder 

What to know about buying a new construction home

Buying a new construction home allows many homeowners to build their dream home in their ideal neighborhood. It’s an attractive option, especially for buyers in highly competitive markets where you often have to compromise on your desired home features. 

Homebuyers can purchase a plot of land and contract the necessary professionals to build a custom home, such as a builder, architect, and electrical engineer. 

You could also purchase a home that’s been designed, or partially designed by the builder, and include your finishing touches on the property. 

The average cost of building a brand new home ranges from $112,200 to $448,944

Building a model home could take anywhere from three to seven months, but it’s possible for it to take closer to a year, depending on the home’s size and where it is being built. 

Choosing the type of construction 

If building from the ground up seems a bit overwhelming, you’ll be glad to know there’s more than one way to purchase a newly constructed house. 

A semi-custom or built-on-spec home could be a better choice for homeowners who want a more simple design. 

Builders work with three main categories of newly built homes:

  • Custom homes. Buyers with enough time and resources to build their dream home from the ground up will want a custom home. Custom homes allow for the buyer to have a say in just about every aspect of planning and construction. This would involve purchasing an empty lot, hiring a builder for the project, and consulting with contractors on exterior and interior details of the property.
  • Semi-custom homes. Buyers interested in purchasing a customized home in a higher-end neighborhood may prefer a semi-custom home. These kinds of homes are partially designed by the developer, with the buyer having some say on the home’s features. They won’t look like every other home in the neighborhood, but they also don’t require the buyer to start from scratch. 
  • Spec homes. Homeowners who would like to buy a home that’s brand new, but don’t have the time or resources to design a custom home may prefer a spec home. Also known as a production home, this type of build is move-in ready and allows for minor customizations to be made by the buyer.
facade of modern suburban mansion
A new construction house is your way to buy the exact home you want with all the details tailored to your specifications

6 steps to buying a new construction home

Once you’ve decided on the kind of new construction home that fits your budget, timeline, and design preferences, it’s important to understand how the new construction process works. 

As with buying a previously-owned home, you’ll need to secure a mortgage, find a buyer’s agent, and get a home inspection. 

However, buying a new construction home comes with additional steps to ensure an efficient and timely build. 

1. Find a buyer’s agent for new construction

It may seem like an agent isn’t necessary when you’re building your own home but an agent is even more important —especially if that home is a custom build. 

The right agent will counsel you on home upgrades and design choices, ultimately saving you money on customizations. 

An agent with an eye for detail will be able to tell you if a certain upgrade will directly increase your home’s value and suggest substitutes that are equally as appealing, but less expensive. 

That’s because a good agent knows the market, the neighborhood, and may even have a relationship with the builder.

An experienced agent will also be able to spot any irregularities in construction contracts. While you won’t be using an agent in the traditional way, they will be able to assist you in conversations with the builder and contractors on the project. 

2. Secure mortgage and construction financing

Unless you’re paying for a new home in cash, you’ll need to fund the purchase through a bank or other lender. 

You should note that not all mortgage lenders work with new construction homes. 

A new construction home mortgage differs from a typical mortgage in the way that funds are distributed. Instead of releasing the entire amount at closing, lenders will allow for release advances throughout the construction timeline. 

Builders often have lenders they can refer you to, but ask your agent to make recommendations as well. 

Once you’re pre-approved for a mortgage, you’ll have a better idea of your building budget as well as the down payment required for the mortgage loan. 

A mortgage will cover most of the costs of the purchase of the property, but you will still likely need a separate construction loan for labor and materials to actually build a home from the ground up. 

3. Choose the right location

Perhaps one of the biggest advantages to buying a new construction home is being able to choose the exact spot where it’s built. 

When you invest in a new home, you invest in the neighborhood as well. 

Aside from selecting a plot of land that complements your custom home, you also want to consider the following about the location:

  • Proximity to public transportation/traffic pollution
  • Distance from entertainment options and recreation centers
  • Access to grocery stores, pharmacies, hospitals
  • Price of property taxes
  • Commute time to work
  • Quality of school districts

A solid real estate agent that’s familiar with the area will be able to tell you if any changes are planned in the neighborhood  that could positively or negatively impact your desire to live there. 

Make sure to ask your agent about planned developments, zoning changes, or utilities. They’ll also be able to inform you on neighborhood demographics, crime rates, and zoning laws.

4. Research home construction companies and their previous developments

Before choosing a builder, make sure to check their ratings on the Better Business Bureau. You also want to compare home warranties among different companies. 

Building a home is a major undertaking and should be placed in the hands of a company you can trust. 

It’s also a good idea to check with the state attorney general to see if any complaints have been filed against the building company. 

Websites such as Angie’s List, Google My Business, and Yelp are also good places to search for customer reviews. 

After you’ve verified the builder’s legitimacy,  request examples of their previous developments. 

Ask if there are any common issues, such as unfavorable weather conditions or limited access to materials, that may arise when building a home in your area.

5. Design your new home

Once you’ve secured financing, chosen an ideal location, and selected a trusted builder to work with, it’s time to design your new home! It’s the most exciting, yet the most expensive part of building a house.

This is when a knowledgeable real estate agent will come in handy, as builders and contractors will likely present you with a wide selection of costly items. 

Working through floor plans and home features will take some time, so make sure you are clear about what you want and whether or not you can afford it. 

You also want to ask your real estate agent about any possible homeowner’s association (HOA) restrictions. 

Most new construction neighborhoods will have some type of HOA regulations in place to ensure the neighborhood’s aesthetic remains cohesive. 

6. Get a home inspection

Although builders undergo a variety of inspections while building a home, it’s always a good idea for buyers to order an independent home inspection themselves. 

A home inspection will ensure the home was built up to code and that there are no failures in the structure. 

Once the house is officially under your name, you will be responsible for any upgrades that need to take place before moving in. 

Pros of buying a new construction home

Being able to build your dream home. Building a new construction home from scratch gives you the opportunity to hand pick every aspect of your home. There won’t be another home like yours. 

Everything is brand-new. Other than the contractors building your property, nobody else has touched anything in the home. You won’t have to worry about excessive usage of any appliances before moving in.

Lower maintenance & more energy efficiency. Most builders use the latest technology and energy-efficient materials to construct new homes, surprise repairs in the near future are unlikely. 

Cons of buying a new construction home

It can be costly. A new home can cost as low as $100 per square foot but some can get as high as $500 per square foot if you choose more expensive details, design elements, home systems, and appliances. 

You have to vet the builders. Building a new construction requires buyers to properly vet builders. 

Although it may be time consuming, it is a necessary part of the process. Failing to do your research could result in a home full of structural and engineering problems which will cost you more money in the long run. 

Move-in date isn’t guaranteed. Since the home doesn’t exist until it is finished, there is no way to guarantee a move-in date. 

A variety of factors can affect the completion of the home such as bad weather, material shortages, and issues with the building crew.

What to do if you want to buy a new construction home

The first thing you want to do is decide which kind of newly built home fits your construction timeline and budget: custom, semi-custom, or spec home. 

Next, you’ll need to find a buyer’s agent that’s familiar with the new home construction process and secure funding from an eligible lender. 

With the help of your real estate agent, you’ll select an ideal neighborhood for your new build and choose a reputable building company. 

Once you’ve chosen the right professionals for the job, you can move forward with designing your home.

Your level of involvement in the design process will depend on the kind of new construction home you’ve selected. 

Keep in mind that working with the builder will require a substantial amount of time, energy, and financial resources on your part. Make sure to factor this in when deciding how you would like your home designed. 

Sign up with Flyhomes to connect with a knowledgeable real estate agent, experienced in the purchase of new construction homes. 

About the author: Vivian Tejada is a freelance writer and small business strategist based out of Providence, RI. She writes SEO blogs, property descriptions and website content for real estate companies. She’s also an avid traveler, location-independent and enjoys trying out new restaurants. 

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