If you are thinking of buying or building a brand spanking new home, you’re in luck because this article was created for you! In fact, many of my clients have determined the market has become pretty well picked over and the majority of what’s left is either over-priced or junk. Recently I’ve been fielding a lot of questions about buying brand new construction or building a new home, so I’ve decided to help you by outlining the process.
STEP 1: Get pre-approved for your construction loan or to purchase the newly built home once it’s constructed by the builder. This is especially important for new construction! If you are buying a lot and building a home, the construction loan underwriting process is much tougher than if you are buying an already built new home. This often requires more down payment, better credit and lower debt to income ratios. I’ve had many clients qualify to buy an existing home but do not qualify for a construction loan.
If you are using a builder like Gough or Wright Homes to build your home for you (both do great custom construction in Salt Lake and Utah County) then you just need what’s called take out financing to buy the property from the builder when construction is complete. You really have to be carefully pre-approved with this approach because you will be giving the builder non-refundable construction deposits and if you can’t close on the take out financing then you will lose that money (insert swear word here). It’s important that your mortgage team not only look at the last two years of your credit and income but we also try to account for any changes in interest rate, etc. over the next 90 to 180 days as your home is being constructed. We will make sure your loan is fully underwritten and approved prior to giving any non-refundable funds to the builder.
STEP 2: Locate a community and lot to build your dream home on. Once your mortgage (construction or take out financing) is approved then you know how much you’re comfortable and capable borrowing and can choose a lot.
Tip: You really want an expert REALTOR that specializes in land and new construction to help you with this. If you’ve not built multiple homes before there is a TON that you do not know. Simply put, hire a land expert and allow them to explain all the mistakes they’ve seen past clients make. You can’t un-build it after it’s built…
STEP 3: Build your home! This is a general timeline and guide to the key steps that occur during the course of construction.
1. Customize house plan with builder
2. Color Orientation- Coordinator & suppliers with options pricing (1-2 weeks)
3. Pre Construction Meeting (3-4 weeks)
4. Color Selection Meeting- Finalize decisions (6-7 Weeks)
5. Start Dig (7-8 weeks)
6. Electrical/Flat-work Meeting- Discuss location of lights, plugs, options & concrete (11-12 weeks)
7. Walk through Meeting- Confirm upgrades are in place, create punch list of missing items (18-20 weeks)
8. Closing & Completion of Home- Time will depend on size & scope of home (19-21 weeks)
STEP 4: Close on your home and move in (picture yourself in home nirvana here!) If you’ve done a construction loan in your name then you already own the home and you just move in. If you’ve chosen to have the builder construct the home for you, then this is when you get your take out loan and actually purchase the home. Our goal is to have your loan closed the same day the city issues the Certificate of Occupancy so you can move in immediately.
So that’s it, you are now more educated than most people who have done this process several times over. Congratulations!