When you’re shopping for a home, there is an undeniable appeal in going the new construction route. Why move into someone else’s old space when you could work with a builder to create your dream home? You’ll get brand new everything with all the modern details and likely have fewer maintenance costs too. New construction homes may seem like an easy option, but they do have their drawbacks. For one thing, mortgages for new construction homes tend to be a little more complicated than their resale counterparts. You’re also at risk of falling victim to predatory lending tactics from builders in the process. Here are 15 answers to some of the most common questions about new construction homes.
1. What is a new construction home?
Let’s start with the basics: A new construction home is any property that has not been occupied since it was built. If you’re buying from a builder, your new construction home most likely started out as a simple plot of land. One day, a keen-eyed developer came along, purchased the land, and divided it into buildable lots. They then sold the land to a builder who invested time and money to construct properties on each lot that could be sold to homebuyers for a profit.
2. Are there different types of new construction homes?
Broadly speaking, there are 3 types of new construction homes: custom, semi-custom, and spec. A custom home affords you the most creative control over the design of your new home. In fact, you can work with an architect to have your say over every single detail—right down to the way your doors swing. If you’d prefer to leave a few of the decisions to the professionals, you may opt for a semi-custom home, which is a pre-designed property that you can change to meet your preferences. Finally, if you’d prefer to just not think about it at all, you may decide to move into a spec home, which is a move-in ready home, built out with the kinds of features designed to appeal to just about anyone.
3. What’s the difference between a construction loan and a loan for a new construction?
It’s tricky, but there is a distinct difference between a construction loan and a loan for a new construction. A construction loan is used to literally finance the building of a property. For example, if you wanted to buy the raw materials to build your own house, you might take out a construction loan to help support your purchases. A home loan for a new construction is when you borrow money for the purpose of buying a home from a builder.