New homes are wonderful to behold â just choose a home builder you like and start searching for fantasy constructions without a dent or nick, offering the latest styles and designs. Sign on the dotted line, and you can own the newest home in town, finished to your every whim.Click to see today's rates (Sep 24th, 2017)
In fact, the builder will make it easy to sign up.Â With many new home purchases, itâs entirely possible that the builder will orchestrate the whole thing.
The builder's lawyers draft the specialÂ sale agreement, the sales representative performs the inspections, the builder's captive mortgage company finances the transaction, and the builder's closing affiliate takes care of settlement.
Itâs a neat and tidy process â and one which leaves the buyer entirely dependent on the builder. In the best case, a new home sale can be perfectly fine. But what about something less than the best case?
A house is a complex product, and lots can go wrong. How can buyers protect themselves when purchasing a new home, one of lifeâs biggest expenses?
Many builders construct new home communities, but they're not all created equal. The National Association of Home Builders (NAHB) recommends that youÂ visit a builder's recently-built houses and subdivisions.
Check out a subdivision on the weekend, when homeowners are likely to be out and about, walking, gardening, or exercising. Introduce yourself and say you are considering buying a home from the builder who built their home.
Talk to several owners, and try to get a random sample of opinions. The more people you talk with, the more accurate an impression of a builder you are likely to get.
When you visit model homes or inspect current inventory,Â evaluateÂ the levelÂ of the construction features. Inspect the quality of the cabinetry, carpeting, trim and paint.
Here are five basic tips:
First, work with an experienced real estate broker, someone who can be a buyerâs agent and has helped other purchasers acquire new homes.
Always visit new homes with your broker, and never go by yourself. This way, you'll be able to negotiate theÂ brokerâs fee with the builder. For more information, real estate site Owners.com offersÂ an informative video calledÂ How Real Estate Commissions Work.
Second, get a qualified home inspector. At first, it might seem that an inspector is unnecessary because the home will be new. However, even new homes can have defects.
Be aware that an appraiser is not a home inspector, and that the builderâs representative works for, um, the builderâŚ.
âTell the builder that you want the right to have an inspector of your choice, and at your expense, conduct these inspections,â said DC attorney Benny Kass, writing for The Washington Post. âYour sales contract should clearly spell this out.â
The usual idea, says Kass, is to assure that the inspector visits the property three times: before the foundation is poured, before the insulation and drywall are up (so the inspector can see plumbing and electrical work before walls are sealed), and before the walk-through.
Third, the builderâs sale form is typically not the agreement local brokers use to sell homes in your community. Instead, itâs written by the builderâs attorney to give the builder every possible edge.
The best advice is to get an attorney to help you understand what the proposed agreement says and negotiate terms.
Fourth, it often happens that a builder has an affiliated lender. The usual offer is âuse our lender and weâll throw in upgrades worth x dollars.â
âIf you are buying a newly constructed home,â explains the Consumer Financial Protection Bureau (CFPB), âa builder may offer you an incentive or âdealâ if you select its affiliated mortgage company or other settlement service business.
You should shop and compare interest rates and other settlement charges before entering a contractual agreement to use these affiliated companies.â
To ensure a smooth closing and minimize costs, you should shop lenders and get pre-approved before you even start home shopping.
That's easy to do online. Then you'll be in a better position to know if the freebies you get using the preferred lender are offset by additional costs. Â And you'llÂ have a solid idea of your financial capacity and the mortgage options available to you.
Is it best to use the builderâs affiliate or an independent lender? That depends on the package of benefits the lender offers, and the proposed rates and terms available. As the CFPB says, itâs wise to shop around.
Fifth, in the same way that builders often have captive lenders, they also are likely to have affiliated closing companies. Again, you have the right to shop around for your own closing agent.
If you do use the builderâs settlement company, ask if they helped the builder acquire the property where your home is located. If they answer is yes, you may be able to get discounted title insurance. Tell them you'd like a "short" or "re-issueâ rate.
Today's mortgage rates remain low, under four percent for 30-year fixed loans as of this writing. Keep in mind that for new construction, you may not be able to lock until your home nears completion.Click to see today's rates (Sep 24th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Thomas D. Software Developer
As a first time home buyer, The Mortgage Reports has been the only voice that I can trust, and the expertise has been helpful.
I enjoy reading The Mortgage Reports. The articles are informative with lots of good stats and trends.
Sandi C. Customer Service Representative
The Mortgage Reports has been extremely helpful in educating me about mortgages, and what is available. Thank you for all that you do!
2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)