It's out with the old and in with the new construction home.
If you're asking yourself, "I wish I could just start over" — when it comes to your home buying, designing, and furnishing journey that is — then there are many benefits to pursuing a new construction home and its financing options. BUT those benefits may cost you.
Let's dive into the pros and cons of investing in a new construction home and whether or not the former outweighs the latter.
One of the most exciting parts of a new construction home is tailoring it to your every want and need. Open concept kitchen, tall ceilings, a spiral staircase and jacuzzi tub could all be yours from the get-go. While you can always change out old fixtures and furnishings with remodels, existing homes rarely offer you the opportunity to change the layout of house.
When building a new home from scratch with everything you want, there are many design choices that you get to make on your own. Because of this, there will also be no need to make updates in the near nor distant future.
The sins of tenants past need not apply here.
You'll be the first to use the appliances, the first to flip the light switches, and the first to walk across the floors. A new construction home means newest materials and newest sealants.
Most new construction homes are using the latest energy-efficient building materials which would save you money on those pesky utility costs that are continuing to rise. Vinyl windows, new door trim, and better wall insulation save homeowners on gas and electric bills every month, which help offset the higher cost of a new home over time.
Your brand new construction home offers many perks, the biggest of which being the money you'll save on maintenance and costly repairs. You don't have to worry about a leaky roof or spotty A/C unit. Even though it is a new home, it is still recommended to get a third-party home inspection done to save on future maintenance headaches and expenses due to a defective project.
Additionally, things that do breakdown are covered by builder's warranty.
When working directly with a builder on your new construction home, they will typically offer warranties that you could never get on an existing home. While homeowner's and title insurance will cover significant events — flood, fire, fraud — home builders warranties go beyond that. Though not all created equal, many home builder warranties cover anything that happens within two years of the date of purchase.
Based on the area and average price range of where you are looking to live, you could be paying up to 20% more on a new construction home than if you were to purchase an existing one. With the current housing market conditions — material shortages, builder / contractor scarcity, and high home and land prices — that percentage could increase.
It is also hard to say what that final price could come out to due to additional costs that could pop up during the construction process. Budgeting is difficult because you won't know how much a new construction home will cost until it is completely done.
It ends up being a matter of if the pros mentioned above are worth that higher cost for you.
The higher cost to build also results in higher taxes following its completion. New construction neighborhoods in general have higher taxes due to the lack of established infrastructure. For example, many new developments have to take out loans from the city to install the roads and electrical grids. That loan is then paid down by homeowner taxes — a.k.a. you.
High property taxes combined with monthly mortgage payments may turn both you and your lender off of a construction loan.
The home-building timeline is unpredictable. Move-in readiness can fall anywhere between 3-12 months, making new construction homes unfavorable for those in temporary housing or looking to get out of their current living situation ASAP. Buying an existing home allows you to move in within 30 to 45 days of signing the contract.
Homeowner's Associations (HOAs) are increasing in popularity across the country and new construction neighborhoods tend to have the strictest rules on home design.
HOAs want to maintain uniformity in their neighborhoods so that one homeowner's extreme property addition (i.e. neon pink driveway) does not negatively affect neighboring homeowner's property values. Existing HOAs are more lenient on what you can and cannot do to your home design because in order to pass new rules, they have to be voted on. New HOAs are able to create rules upfront instead of trying to add them on later.
Interior designers and non-interior designers alike can get overwhelmed by all the choices when it comes to your new construction home. Light fixtures, tiling, and paint colors — oh my! In addition to the nonstop selection process, there will be limitations on what customizations can and cannot be done, especially without increasing the price.
As you may have seen at various construction sites, the vegetation in the surrounding area is typically sacrificed in favor of the new home / building. Because of this, the cost to have new landscaping put in can add up, and most likely come out of pocket. The new landscaping will also take time to take root — pun intended.
A "new house smell", but at what cost?
New building materials emit up to 10,000 chemicals called VOCs (volatile organic compounds) which the CDC has linked to a variety of health issues. Luckily, there are recommended VOC exposure limits and the potentially harmful emissions reduce over time before disappearing completely. So do your research, especially those who are sensitive to chemicals.
There are a lot of factors that go into the underwriting for a new construction home. With flexible financing options, it easy to get lost in another important decision of the home-buying and -building process. Luckily Flagship Bank has experienced mortgage professionals that can customize your financing, as you customize your home. Give one of them a call today and start your journey towards Home Sweet Home.