Owning a house is almost everyone’s dream come true. Whether it is buying a pre-owned home or purchasing a new construction (which can save you up to 15% of the cost), the feeling is unparalleled.
However, there are a bunch of things you need to consider in any of these cases. For instance, the process of buying a pre-owned house is not the same as that of buying a new construction house. You must first weigh both the pros and cons of each process before settling on any.
Today, we’ll dwell more on the process of buying a house from a builder (a new construction house). What you require to make that purchase, and what you should look for. Additionally, we will also look at the best steps to follow when purchasing.
This guide offers answers to all these questions and more.
The Process of Buying a House from a Builder
The house buying process for a new home isn’t all that complicated. However, you must know precisely what you are getting into before dipping both feet in it. First, look at all the pros and cons to understand the entire process to see if it’s the right fit for you. From there, you can follow these simple steps (not standard for every builder or location) to make your purchase.
Research about Builders and Locations
The process of buying a house from a builder can occur in two ways. Either,
- Having a preferred builder and buying a house from a location they are developing; or,
- Choosing a preferred location and picking a builder to develop your house in that area
Optimizing both the location and builder aspects is the first step of ensuring you get your dream home.
The best way to do this is by first bringing a real estate agent on board. While it’s not a must to have a realtor when buying a new house, they are almost always necessary. They will not only help you choose the best builders and locations but also guide you throughout the entire purchase process.
To get the best results, research extensively and choose a location and builder that suits your needs. Don’t choose a builder without proper qualifications and track record, just because you like them. Also, don’t pick a location that’s not suitable for you just because a particular builder operates there.
Find the Best Lender
Finding a suitable lender well-versed with new construction home purchases is crucial if it’s not a cash purchase. The lender will guide you in matters of finances, help you budget according to what you can afford, and guide you through the process.
Your current debts and income status will play a significant role in this step. The lender might even request you to dispose of your existing property before providing the pre-approval. When this is the case, it’s prudent to seek counsel from a financial advisor to determine your options.
Choose the Style and Items to Include in Your New Home
This is one crucial step in any house buying process. Choosing the design, or how your house should look, and the standard items to include is paramount.
When doing this, ensure that you consider all variables, including the possibility of a bigger family in the future. This way, you don’t choose an extra small house or a big one. For instance, how many bedrooms, the number of levels, and the square footage of the house?
Also, pick the standard items that must be included, like the type of floor, countertops, tiling, paint colour, and even light fixtures. When doing so, consider the price and quality of these items.
Figuring Out Your In-Between Homes Living Situation
If you have an existing home, you need to sell it before getting into the new one. It can be a risky move to wait until the last minute to sell your current house, as you might not be able to sell it fast enough. Also, you don’t want to be stuck with two mortgages.
This presents a unique problem as you must find a temporary place to stay before your new house is ready—and this can take up to six months.
Working with a good real estate agent will ensure that you put your old house on the market at the most appropriate time. The agent will also help you to figure out a suitable place to stay and store your stuff for the required time. You can choose any temporary housing options, including short leases, extended hotel stays, sublets, or month-to-month leases.
Reviewing and Signing the Warranty Documents
This is another crucial thing in the process of buying a house. It is paramount that you evaluate and understand what type of warranty the builder is offering.
Since this isn’t a cheap purchase, it’s prudent to know what the warranty covers, how you can make a claim, and even how you can deal with any arising problems between you and the construction company.
Most builders or construction companies offer a warranty known as the builder warranty for a new construction home. This warranty covers the permanent parts of the house. These include things like plumbing, concrete floor, and electric work.
Besides the builder warranty, you can also purchase a home warranty for an extra cost. This is actually a service contract that applies to existing houses. It covers repairs and replacements of various items in the house like appliances, HVAC (heating, ventilation, and air conditioning) systems, etc. This type of warranty is optional. While the builder backs many of these new-house warranties, they must purchase the warranties from a third party. This helps to protect new home buyers with VA and FHA loans.
What Does the Warranty Cover and for How Long?
As mentioned earlier, a builder warranty covers artistry and materials related to some permanent parts of the house. These include things like electric systems, HVAC systems, plumbing, windows, etc. The warranty also dictates how any repairs will be made.
As for the coverage time, it depends on the material or the part of the house. For instance, your warranty might come in any of these three types.
One Year Warranty
This type of warranty covers artistry and materials on the various parts of the house. For instance, doors and trimming, cover siding and render, and paint are covered in the warranty’s initial year.
Two Years Coverage
A two-year warranty covers things like plumbing, HVAC, and the home’s electrical systems.
10 Years Coverage
Here, builders will usually cover any significant structural defects or problems. These are defects that might cause risk or danger to the lives of the people living in the house.
For example, if a roof collapses, it certainly could cause significant damage. This can, therefore, be categorized among the significant structural defects.
Your agent is crucial during this stage, as they help answer any questions or uncertainties you might have.
Closing the Deal
When you are satisfied with everything you see and you’ve understood the warranty documents, it’s now time to close the deal. This is the final stage in the new house buying process, which happens at the title company’s office.
The title company determines whether your loan has been approved and that all the paperwork is signed. It also makes sure that the ownership of the buyer is recorded.