How to Save Money When Buying New Construction
Over the years, the prices for new construction homes have been steadily increasing, but there are a still a variety of ways to save if you are interested in buying a new home. Like any large purchase, a good strategy can get you a great deal. Here are a few questions you can ask the builder that could save you tons in the long run:
“What are your incentives for using your preferred title company and lender?”
Oftentimes builders offer certain financing specials as incentive to get buyers to use their preferred lender and title company, but they will rarely tell you about these deals if you don’t ask. Here are some of the incentives they can offer:
- A lower interest rate compared to other lenders
- A longer rate lock with no fee. If you are building a new home, especially if its custom, it can take months to complete the construction. Most lenders will only keep a rate locked for you for about 6 to 8 weeks, and if this time passes they will add on a significant amount of extra fees. So this extended amount of time with the same rate is a great incentive.
- Lower closing costs
- Lower upgrade costs for interior features
As you can see, these would definitely be worth looking into, so make sure to ask your home builder about any special financing packages and shop around a bit to compare deals before you decide.
“What are the standard options?”
Most model homes are set up with all the upgraded features, so many buyers will mistake upgraded finishes for standard features and only discover their mistake later when all the additional costs are stacked up. So, it’s a good idea to ask a builder ahead of time what the standard options are, what upgrades are available, and how much each upgrade will cost.
You also might be able to save more by getting the standard options for you home and then hiring an independent contractor to do the upgrades for you after. This way is almost always cheaper than including the upgrades in your original construction with your builder. However, the main drawback to this is the independent contractor will usually need to be paid in cash, while the builder’s charges can be added to your loan amount so that you can pay it over time rather than all at once.
“What are your long-term plans for the area?”
Asking your builder what their plans are for the community you are interested in can be a key question for many home buyers. If you are interested in one of the first few homes they have built in the area, but they are planning to add 60 more homes to the community, you will have to live near a lot of construction mess and noise for a while after you move in. This can be oftentimes be enough to convince buyers to look elsewhere. Even if more construction does not deter you from the community, asking about their long-term plans can at least prepare you in advance.
“What are the HOA details?”
Every homeowner’s association has their own rules, costs, regulations, and conditions so making sure you get these from your builder is essential. You will want to know when your HOA dues need to be paid, and if they restrict anything you are interest in, like fences, trees, or storage sheds. Many builders will also cover HOA costs until about half of the homes in the subdivision get sold.
“What warranties are provided?”
Builders will usually offer buyers a 10-year warranty for major structural elements of the home (ex. Roof) as well as a workmanship warranty for a year. Always ask for clear documentation listing exactly what the warranty covers and what it doesn’t to avoid inconvenient surprises. Manufacturer’s warranties are also commonly gotten for the hot water heater, washer and dryer, air conditioner, roof, and kitchen appliances (like the stove and refrigerator).
“Can you refer me to some home owners you have worked with before?”
References are important to review before you make your decision about which builder to choose. You can ask home owners who have worked with the builder before about their experience, plus you can learn how responsive the builder was to questions, concerns, updates, and more.
These previous customers are normally best found by you if you want to get the whole picture, because builders will usually only give you references for the people who have the most positive reviews. If it’s a pre-existing neighborhood with one builder, then ask some of the neighbors. You can also find builder reviews online.