Pros and Cons of Buying a House That Is Still Under Construction

 The home inventory shortage is making purchasing a home still under construction a normal financial decision. The National Association of Realtors (NAR) says that the country is facing a sharp decline in available housing to purchase. The NAR report includes housing such as condos, castles, and everything in between.

Once again, this shortage is stemmed from low-interest rates and high buyer demand. Soaring home prices and low listings mean this is a seller's market. Professionals in the industry are seeing 20 to 30 offers on the same property. In fact, buyers are willing to put a contract on a homesite and wait up to six months to close and start construction.

A new construction home purchase is a lot different than purchasing a traditional resale. The biggest difference is that you are purchasing a home that does not exist yet. The seller is the builder or a company instead of the owner of the home. If you are closing on a home that is not yet built, you will not be able to obtain a traditional mortgage instead you would pay cash or finance the land purchase at the beginning and then take out a separate construction loan to build.

One of the biggest benefits of new construction is a buyer will get a brand new never lived-in home. A buyer will not have to battle the market and get outbid on an existing home. If you get in at the beginning you can have a say in your home design.

On the flip side, there is a chance that the construction of your new home is terrible and there are delays on materials and workers. “If you’re not buying from a really good builder, the odds of problems cropping up increase substantially,” Sheehan says. “It’s quite important who is doing the work,” says Realtor Joey Sheehan.

If you do decide to go this route, do your homework on the builder. Go to some of his existing projects and get testimonies. Remember open communication is the key, stay in communication with your builder and record both verbal and written conversations. New construction is an exciting way to go, especially in today's housing market.

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Know Your Home Buying Process

There are many tools that you can use during the home buying process.  You can do the majority of your own research by using online resources on the Internet.  You can manage your finances and credit and get quotes from lenders and banks on your mortgage.  You can research different areas of

town to find the best locations to buy your home by checking out reviews of area information.  Once you find out how much you are able to spend, where you want to purchase your home, and different homes that you would like to actually go out and visit, you can retain a Realtor to act as your buyer’s agent to buy your new home.

Even if you hire a Realtor, you are going to want to stay the savvy, “in the know” home buyer who knows the questions to ask and the information to get in order to get the best home for the huge investment that you are going to make on your home.  Below is information which is important to know when buying a new home.

What Is Allowed

Unless you are buying a home in an established community with known restrictive covenants and a homeowners association, you are going to want to make sure that anything you want to do to or store at your home is allowed.  Zoning laws can hamper a new homeowner’s aspirations by not allowing you to run a business out of your home, build a workshop at your house, build a fence, store your boat or RV, or add an addition.  So, before you sign on the dotted line, be sure to know if the home you are buying has any zoning or covenant restrictions.

Use an Inspector

If you are buying your home “as is” with no changes or required improvements by the seller, then you won’t need to worry about the condition of the home.  However, if you want to make sure that you get your return on investment, and don’t “buy a lemon,” you will want to make sure you get a home inspection.  Realtors know many people in the real estate industry, so they may be able to recommend a quality inspector to you, but make sure that the inspector they use is extremely thorough and has your, as the buyer, best interests in mind when making the inspection.  You definitely don’t want an inspector who glosses over a report so that your Realtor can “make the sale.”  You may want to get a referral and hire your own inspector.  If necessary, get the seller to cover the cost of a home warranty that covers all major appliances and structural systems of the home to “cover your bases,” as well.

Your Contract

Just like your parents and teachers always taught you, don’t sign anything unless you read it.  This applies to every piece of paperwork that you are going to sign regarding your new home purchase, from your contract, to counter offers, to waivers, to your closing documents.  Not only should you make sure that you read everything, but you should also be sure to “read all of the fine print.”  If there is anything that you absolutely don’t understand, make sure you get it clarified before you sign anything.  Another important point about this is to get everything extra in writing.  This includes everything that is outside of or not written on the paperwork that you are reading and signing.  If the seller promises to fix a faucet, repair a door frame, or include additional equipment to “make the sale,” make sure you get it in writing.

Negotiate Everything

Most everything is negotiable when buying a home from the home price, the purchase of a warranty, home repairs / deductions, and closing costs.  Any chance you see to save yourself some money, attempt to negotiate.  It never hurts to ask the seller, especially if you are already qualified with guaranteed money from your lender.  The worst thing that can happen is that the seller can so no.
Using the tips above along with the other tools at your disposal to make a good home buying decisions, you can retain a Realtor and then monitor the process yourself to make sure that you are fully informed during your home buying process.


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Buying a New Home – Fix Your Financing!

Financing is one of the biggest factors in buying a new home.  From the appraisal, to the loan application, to the Good Faith Estimate, to the mortgage, to the large amounts of paperwork that get faxed, scanned, and e-mailed; you can almost spend as much time acquiring money to buy your home as you did finding the home itself.  Sometimes searching for a home takes less time & effort! In order to have the best chance at bidding for and putting a contract on the home that you are going to buy, we recommend that you begin with a lender commitment letter which shows your potential seller that you have the financing and ability to close on the loan. This gives you an edge over other home buyers and also dictates the amount of money you are able to spend on a loan.

Before you ever get this letter from your lender, you are going to need to seriously examine your financial situation in order to determine if you are ready to go through the rigorous loan process required most banks and lenders.  In order to do this, you will need to look at the amount of money you make, how long you have made this amount of money, if you are employed and how long you have been at your current employment, how much your monthly bills are (minimum payments on credit cards and fixed loans), and your credit score.

Your credit score should always be a work in progress in your daily life.  Pretty much all of your financial decisions in life affect your credit score, so you are not going to want to just wake up one day and decide to buy a home.  You will want to check your credit score, and if it need improvement, come up with a plan to get rid of all of the negative information on your score before you apply for a mortgage.  The earlier you start on your plan and get your score up, the longer you have a consistent good credit history, the better chance you have at an excellent interest rate and quality loan offering.

If you have low / no credit, there are several things you can do to “get some credit.”  Secure loans and credit cards are a great way to establish credit because these products are designed to report to the credit agency monthly with your on-time payments.  This establishes that you can maintain payments / credit and also boosts your score.  Another way to work on establishing your credit is to stay super strict on your credit usage.  This means that you should use a low percentage of the credit available to you and make your payments on time. Keeping your “credit utilization ratio” below 30 percent makes the credit agencies “happy.”

Finally, kind of a no-brainer, common sense concept, but you want to get rid of all derogatory marks on your credit.  This includes old utility bills, written off credit cards, old medical bills, and any other reported debts that you owe.  Really working on your credit score is vital to having the best chance at financing a new home loan with a lender or bank.  When you are ready to get started on your home buying process, Contact Ron Lee Homes for Homes for Sale to Build a New, Custom Home.  Call 985-626-7619 or E-mail Info@RonLeeHomes.com.


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