First Time Home BuyersMortgageReal Estate April 15, 2024

Have You Considered New Construction?

Have you considered new construction? If not, here are several reasons why you should expand your search criteria to include new construction homes.

Buying from a builder is certainly different from buying from a home seller. Builder contracts can be challenging. This alone might have you a bit hesitant to consider a new construction home. Just remember, when purchasing your home your realtor will assist you throughout the entire process whether you are purchasing an existing home or a new build.

If you have not yet partnered with a local real estate expert, connect with us.

Here’s why you should considered a new construction home:

Considering a new construction home increases your pool of opportunity. Sometimes, buying a new construction home allows you to have a say in creating the home of your dreams. Better yet, you can often get new construction home with reduced rates. Follow along as we discuss each of these benefits of purchasing a new construction home further.

The new construction market increases your pool of opportunity:

On a positive note, we are experiencing a slight increase in inventory of existing homes for sale. However, when compared to historically standard numbers of homes for sale, such as in 2018 and 2019 inventory of existing homes today is still low. Low inventory can leave buyers feeling as if they have exhausted all their options.  When this happens, buyers may feel as if buying a home is just out of their reach. If you are finding yourself feeling this way, have you considered new construction? New construction has begun to see an uptick providing buyers a huge opportunity. If you are in search of a turn-key home or you want the ability to customize your own home, you have more options right now.  Not only do you have more options, but many builders are offering lower rates. Keep reading to find out why.

You have a say in creating the home of your dreams:

Purchasing a new construction home offers the unique opportunity to customize and tailor the property. Customization allows the home to fit your specific needs and preferences. Unlike buying an existing home where you may need to compromise on certain features, sometimes new construction allows you to make decisions on everything from the layout and floor plan to the finishes and fixtures. This level of customization ensures that the home truly reflects your personal style and requirements. Are you ready to create a space that feels like yours from the moment you move in? Additionally, being involved in the construction process allows you to incorporate modern design trends, energy-efficient features, and the latest technology, ensuring that your home meets both your current and future needs. Overall, the ability to customize a new construction home offers unparalleled advantages in creating a living space that perfectly suits your lifestyle and preferences.

Be sure to refer to your agent who can assist you on determining the quality of construction. Keep in mind your local agent has knowledge of local builders reputations. They can help you review and negotiate your contract to help you get the best terms. As an added bonus, they can walk you through which customizations and upgrades will benefit you most not only as an owner but also to help get you the best return on investment if you ever decide to sell in the future.

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New construction builds can come with reduced rates:

If you weren’t convinced that you should consider new construction already, you will be when you learn that some builders who have already broke ground on construction offer incentives to help buyers be able to afford a new construction. Keep reading to find out why and explore some of the options.

The simple truth is, the longer a new construction home sits on the market the more it costs the builder. Builders are eager to sell you the home because they are not living in it. First American’s Chief Economist, Mark Fleming explains:

“Builders aren’t rate locked-in. They would love to sell you the home because they’re not living in it. It costs money not to sell the home. And many of the public home builders have said in their earnings calls that they are not going to be pulling back on incentives, especially the mortgage rate buydown, so that will help the new-home market continue to perform well in the spring home-buying season.”

One of the most popular incentives we are seeing with builders are rate buy-downs. You might be wondering what a rate-buydown is and how it impacts you as a buyer.

A rate buydown is a real estate financing strategy used to lower the initial interest rate on a mortgage loan for a certain period. This is typically done by paying additional upfront fees to the lender. These fees are often referred to as “points”. Each point purchased reduces the interest rate.

There are two main types of rate buydowns:

  1. Temporary Buydown: With this type of buydown, typically the borrower pays additional upfront fees to the lender. In this case, the builder would on behalf of the borrower. These fees are used to subsidize the mortgage payments during the initial years of the loan term. For example, in a 2-1 buydown, the interest rate is reduced by 2% in the first year, 1% in the second year, and then returns to the original rate for the remainder of the loan term.
  2. Permanent Buydown: In a permanent buydown, typically the borrower pays additional upfront fees to permanently reduce the interest rate over the entire loan term. In this case, the builder would pay on behalf of the borrower. This results in lower monthly mortgage payments throughout the life of the loan.

Overall, rate buydowns can be beneficial for borrowers who want to lower their initial mortgage payments, qualify for a larger loan amount, or afford a higher-priced home. However, it’s important for borrowers to carefully evaluate the costs and benefits of a rate buydown to determine if it aligns with their financial goals and long-term plans.

If you have questions or are considering opening up your search to include new construction and would like to partner with one of our agents please do not hesitate to connect with us.