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6 questions to ask when building your dream home

6 questions to ask when building your dream home

By Mitch MitchellMORTGAGE SENSEMARCH 10, 2021

It’s no secret that the pandemic has changed how we live and work. Having seen the value in a partial or fully remote workforce, many companies have reduced the size of their office footprint and have set employees up with all the equipment needed to work from home. But working from home isn’t so easy when sharing a studio or one-bedroom with others who are also facing working from home. 

People felt the urge to spread out. That led many — especially renters — to leave the crowded cities where they were a close commute to a physical office and migrate to the suburbs (or even rural areas) as they look for bigger homes to fit their new lifestyle. 

Home buying meets home building

Many of those looking to put down roots and become homeowners in these new communities opt for new construction. There’s nothing quite like getting the keys to a newly built home, one where you’re the first person ever to live there. But homebuilding is a little more complicated than simply making an offer on a plot of land and selecting a floor plan. With every new construction purchase contract, it may be challenging to decipher what’s included and what’s not. Unlike buying an existing pre-owned home, new construction costs could creep up on you if you’re not careful. 

Because we’re heading into that time of year when people start thinking about buying a new construction home, we’ve put together a shortlist of questions to discuss with your home builder before you jump into this exciting adventure.

  1. What’s included in the cost to build a house?

If you’re thinking of buying in a master-planned community, this might be the most important question you ever ask. When you initially get a new construction quote, you’ll see a base cost. If this number looks too good to be true, it might be because it is. That’s because some builders only present the price of the structure itself when marketing a planned community that’s under construction. To be sure you’re getting the full picture, ask if the cost of the lot — the property the home will be built on — is factored into the base price.

  1. How long does new construction home building take?

A builders’ reputation relies on projects staying on time and on track, but of course, there is always a chance that circumstances (like material delays) will come up to delay the process. According to a 2019 U.S. Census Bureau report, it takes — on average — about seven months to build a house from scratch. 

Be sure to ask if the estimated build time includes the time it takes to get the building authorization and permits. These could take an additional 30-45 days to obtain. Suppose you’re looking at a planned community or subdivision where the builder has already started construction without a buyer lined up. In that case, permits might already be completed by the time you get involved. If you’re looking to build from scratch, it can take significantly longer, especially if you’re working with an architect to draw up custom plans. 

  1. How much can I customize the design of my new construction home?

Some people prefer new home construction because you can make it your own by choosing things like the type of flooring, exterior siding and interior paint colors, light fixtures and ceiling fans, heated floors and more. You’ll have a choice of floor plans as well, and you can sometimes replace an extra bath with a mudroom, upgrade kitchen countertops or combine separate living and dining areas into an open concept. 

However, your options won’t be limitless, so be prepared to compromise your “must-have” list. Each upgrade will add up, which might be why the base cost was so attractive: builders make nice bank on the upgrades. Make sure you’re clear on which finishes are standard and what might be considered an upgrade before you get started. Then decide where you’d like to splurge and where you’d like to save.

To save money, you might consider buying the basic finishes and then hire a contractor to do the work you’re looking for, but that’s extending the time it’ll take for you to settle into your new home, and it’ll be a cost that will have to come out-of-pocket. Working with a contractor is cheaper and helps you avoid the “builder-markup,” but getting the home you want directly from the builder allows you to roll the costs of those upgrades right into your new construction loan and pay for them over time. 

  1. What about appliances?

Some say that the kitchen and laundry rooms are the hardest working areas in a home, so it’s important to choose appliances that suit your lifestyle and design aesthetic. That said, don’t assume that your contract will include what you may consider “essential” appliances. And don’t be surprised if your builder’s choice of appliances doesn’t live up to your standards. Let’s say you love to cook: you might want a bigger fridge and a six-burner stove. Those might all be considered upgrades (cha-ching) to your builder. 

You’ll find that many new construction homes offer what’s commonly known as “builder-grade” appliances, which means basic materials and somewhat lower quality. There’s a good chance everything in your contract will be builder-grade, even if the model home features top-of-the-line appliances. Don’t be afraid to ask about dishwashers, washers, dryers and even kitchen faucets with sprayers. They may not even be on the list of appliances offered and your builder may not be contractually obligated to provide them.

  1. What if something goes wrong?

Many people who lean towards a new construction home think that since it’s brand new, it won’t have the problems that you’d expect to come with a previously owned home. Not so fast. Just because it’s a newly built house doesn’t mean problems won’t pop up. 

What could go wrong? You name it: grading and draining issues, cracks in decks, patios foundations and driveways, gaps in drywall, improperly installed windows, nail pops in the flooring, sticky doors, malfunctioning appliances and water issues. 

Ask your builder what warranties are included in your contract and how long they last. Most will provide a limited warranty, generally good for a year or two of labor, materials and system defects. Possibly longer for structural defects. Make sure you purchase a home warranty if the builder doesn’t offer one with your purchase agreement!

  1. How do I prevent cost-creep?

The best way to take the stress of unanticipated costs is to work with a builder who doesn’t include a “cost escalation” clause in their contract. Cost-escalations are contract provisions that shift the burdens for increasing materials and labor costs from the contractor to the client. That means you’ll be on the hook financially if circumstances change and prices go up. This can cause some friction if it happens while a job is in progress, so an escalation clause has become an upfront way to put it all out in the open and remove some potential stress down the road.

Cost escalation clauses also allow the builder to market the properties at a lower price, and — fingers crossed — it’ll stay that way. If costs increase, the total job price will increase by the same amount.

If your purchase agreement does have a cost escalation clause, make sure it identifies the specific building materials the builder feels are at risk for price fluctuation. It should also explain how you’ll be notified of price increases and how often the escalation clause can be triggered during the process.

Your newly-built home shopping strategy

Just like shopping for a new TV, a vacation or a new car, you need a strategy to get the home you want at a price you can afford. The more questions you can ask upfront, the more you can be prepared for any surprises that might happen before you close. Read this blog from last year for more tips on buying new construction. 

When it comes to financing, remember this: No all mortgage lenders understand the building community or what it takes to get new construction home loans approved and closed without a lot of hassle. We have new construction loans specifically to meet the needs of buyers who want to build rather than buy a previously owned home. We even offer rate locks lasting up to 360 days. 

At Movement, we’ve worked hard to make our new construction loan process seamless for everyone involved. Interested? Find a loan officer in your area to get started.

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