Buying New Construction: What You Need To Know

We're going to cover all that you need to know if you're looking at buying a new construction home!
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0:00 What you'll learn
0:28 New vs Existing
2:09 CalmMoment
3:07 Representation
5:20 Customization
8:12 Deposit
9:59 Financing
13:08 Sponsor
14:18 General Contractor
15:16 Tax Assessment
17:04 Expectations
17:47 Real buyer's experience
Hey, Kyle here with winthehouseyoulove.com today. We're talking about the ins and outs of purchasing a new construction home. So you're going to learn three things in this video. Number one, we're going to talk through the process. So what's the order of everything that's going to happen. Number two, we're going to talk about the numbers.
So what kind of down payment, earnest money, and rate are you going to expect in new construction? And then finally, we're going to talk about incentives of purchasing with new construction over an existing home. So let's go ahead and dive into this. We first need to talk about the difference between new and existing and specifically what we're talking about here in this video is we're talking about a home with a builder who already has a home built.
It's a prefabrication and normally what you do is you go, you talk to them and you customize the home and then they build it and then you buy it. Okay. This is not for custom built homes. Okay. So, what do you need to first consider is looking around and exploring if building a home might be a very similar price to purchasing, especially in this market when home values are continuing to grow and grow building might actually be very similar. I have a video that I'm going to link at the end with Scott Smith, sharing his experience of purchasing a new construction home. And he actually talks about how building was actually the same cost as purchasing a home for the exact same specs that they were looking for in their area.
So consider as an option building might not be as far out as you expect, especially if you're not going with a custom build routes. Okay. Now, what you also want to do, is you want to talk to an agent about how a build might have a resale value. Okay. And this is all going to depend on your market. It's impossible to say as a blanket statement, all builds are better than existing homes or all existing homes are better than builds in terms of the resale value. It's just not a fair comparison to do that. So talk with a real estate agency, see if that market is expanding and growing to make sure that if you purchase a new home, and you're going to be in there for a couple of years that you'll see that value come back.
All right. So before we dive into the next one, what I want to do is jump into a quick CalmMoment. And the reason why is because if you're looking at a new build, you're probably feeling the pressure of the really low inventory happening right now. We are in a crazy sellers market nationally. And this is where sellers have the control, home prices are continuing to increase and there aren't a lot of houses available. So if you're putting in offers, you're probably seeing multiple offer situations, you might be getting beat out by other buyers. And if so, I don't want you to look at construction or new construction just as this last ditch effort to try to get the ball rolling.
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Kyle Seagraves
NMLS# 1701021
Motto Mortgage Alliance
8900 N. Dixie Dr.
Dayton, OH 45414
Equal Housing Opportunity

[@JimiFigDrix]

I love the way you break things down and how simple you make things to understand with such a positive attitude. I really value your videos because of this. Thank you sir!

[@WinTheHouseYouLove]

You are so welcome!

[@shaundocmcgowan8836]

You promised me you'd do this topic! Thank you! We break ground next week. Customization, down payment already done

[@WinTheHouseYouLove]

It took me a while, but finally got around to it! Congrats!!! Let me know when you're all moved it!

[@andrewmilligan5600]

This was so insightful thank you! As a Realtor in upstate NY I recently took over a subdivision for a builder and this helped me to see it all through the buyers eyes. Thx!

[@WinTheHouseYouLove]

Awesome, I'm glad to hear!

[@natasha222]

Hey Kyle! You were kind enough to answer my questions on this topic yesterday, thank you! I had the brilliant idea today to look through your videos, and look what I found. Thanks so much for this content and the time you put into it!

[@WinTheHouseYouLove]

Thank you so much for watching!

[@yuhong3120]

Just had a amazingly productive meeting with a sales rep on a new construction I am interested in buying - thanks to Kyle! The video really helped me get ready for the conversation. We will see how it goes.

[@WinTheHouseYouLove]

Awesome!!!

[@HoloHoloAdventures]

Great information. We plan to buy a new area for a semi custom home and noticed the prices out there are so expensive and competitive.

[@britneyhouston-escajeda7246]

Yeahhhhhh love your videos! Especially for this my new construction will be ready Feb 2021

[@WinTheHouseYouLove]

Thanks so much!! Congrats on your soon-to-be new home!

[@britneyhouston-escajeda7246]

@@WinTheHouseYouLove thank you your videos helped alot in this process. Never thought I'd be able to do this on my own.

[@nunyabusiness3516]

This was exactly what I needed! Thank you!

[@WinTheHouseYouLove]

You're so welcome!

[@smahmood4642]

This video is very informative. Thank you!

[@WinTheHouseYouLove]

Glad it was helpful!

[@patrickambler749]

Have you by any chance made a video on the process/requirements of obtaining a mortgage loan to purchase vacant/undeveloped land and build a home?

[@ItsBoogie.]

Hey Kyle I really enjoy your videos. Can you talk about building a new home on your own lot with companies that specialize in that?

[@WinTheHouseYouLove]

Ooh great question, I'll add it to my videos list

[@KingStreamTv]

I watched a ton of your videos before purchasing my new construction, but this one I missed. Since the rates are crazy, its my first home and I don't know what to expect I made sure to document the process to reflect on in the future lol. That way I can see if I bought at the right time and also for people like me who but prefabrication homes. I originally assumed I will pick the lot and more aspects of the home....NOPE. But at least I got some incentives with my build.

[@paulcandle10]

What about the following strategy: Obtaining the loan from the preferred lenders and utilizing the incentives and then refinancing the loan with a better lender/rate after 3 months or so? Is that a doable/optimal strategy? Love all of your videos!

[@WinTheHouseYouLove]

You absolutely can do that!

[@roaringleo57]

@@WinTheHouseYouLove Keep in mind Refinancing costs a lot of money, several Thousounds $$$

[@missrachelrue]

Thanks so much for the great detail. I’m super curious about when the underwriting process happens for a new construction end loan? For example, you go under contract with XYZ builder and the projected build time is 6-8 months. At what point from the contract date and within the 6-8 months does underwriting happen?

[@user-sb1lb4ri9b]

Love this video. I have one question.When I request breakdown and section A to lender, do I need to provide my SSN and other information for them to request hard credit inquiry?

[@pj1028]

Your channel randomly came up amongst multiple nursing clinical videos on Tuesday when I searched TNCC... Since Tuesday evening, I have been bench watching all of your videos. Very informative. Thank you for the informations. 🙏

[@WinTheHouseYouLove]

That's awesome, thanks for watching!!

[@chastatum3425]

Same for me ♥️

[@meshisha77]

Great info but what im not clear on is how to finance the upgrading. There are many videos on the process but everyone kinda skips over the financing process. Is it because each builder has diff requirements? So you put down ur earnest money n proceed to choosing a lot and upgrades n structural changes. But i hear some builders require cash 10% upfront for the upgrades. How do you finance the upgrades? How do you ensure ur loan will cover it? What should i ask or look for? Still looking at models and the starting prices are outrageous. Need a cushion for upgrades if they can be financed. Thoughts? Thx

[@Cm91489]

Thanks for making this! I just started the process of buying a new construction home that will be finished next summer and this was really helpful. Do you recommend locking in a mortgage rate since they’re so low right now?

[@silvshay]

I was told you can’t ‘lock in’ until no more than 120 days from closing. My place won’t be done until April 2021☹️

[@JasmineAvril]

We close Feb 2021. Can’t lock in yet. 😫 praying rates stay low. 🤞🏾

[@WinTheHouseYouLove]

You're welcome! Personally, I would lock as soon as you can. However, your lender will most likely not allow you to lock until closer to the closing date.

[@britneyhouston-escajeda7246]

@@JasmineAvril same

[@qtseymone1]

Currently in the process. Our earnest money deposit is paying the lot fee + all desired upgrades. They say this will all be applied to closing costs. I assume that closing costs won't cost be $23k. Have you see this before? Our hope is that the overage will just be applied to our down payment. We fully expect to pay our closing costs but estimate them to only be $7k.

[@WinTheHouseYouLove]

Yep, so the earnest money will be a "credit" towards your down payment/closing costs

[@JustDeraj]

This video is super therapeutic lol. Great info man

[@WinTheHouseYouLove]

Glad you enjoyed!

[@erica4197]

Can you talk about Modular homes? Thanks

[@WinTheHouseYouLove]

I'll add it to my list :)

[@SAN_E7]

Great idea! I’m currently renting one.

[@laurasmith9638]

Did you actually make any videos on Manufactured Homes,, this might be the last ditch effort for some,, Most builders right now won't build anything less than a certain $ amount.. so if you want something built you will either have to build yourself or go Manufactured.

[@ashleylaury]

Excellent video!

[@WinTheHouseYouLove]

Thank you very much!

[@ivanl8408]

Great video

[@WinTheHouseYouLove]

Thanks for watching. :)

[@tishcasillas8844]

What are the Pro's and Con's of purchasing one of the Model Home's? Any tips you can provide and how to bring up with as an option?

[@WinTheHouseYouLove]

Hmm great question, I'll need to dig into that!

[@mandypdx]

I close on a model home in 2 weeks. I was warned of the cons- warranties a couple years old, 100s of people have been in your home. For me…pros are: everything is beautiful!! Backyard is already fenced and landscaped. It includes ALL appliances including washer/dryer/refrigerator. It already has AC and an alarm system. Window coverings are included. And, the garage is equipped with AC/heating since it had been used as their sales office.

[@linzou]

Great video, thanks for this! Currently in the process and I would suggest creating a budget for the upgrades/customizations, and sticking to them. Easier said than done unfortunately lol

[@WinTheHouseYouLove]

Thank you so much for watching!! :)

[@Sherny31]

Hi, did you go through their sales rep for the mortgage or you used an outsider mortgage company?

[@linzou]

@@Sherny31 Hi! We went with the home builders preferred lender.

[@Sherny31]

@@linzou thanks hun!!! Congrats I’m going to go with that too and weigh my options on building

[@linzou]

@@Sherny31 you’re welcome! Good luck and enjoy the fun (but stressful) process. 😉

[@clara7920]

Hello Kyle Like the video do make more videos as this. Also can you do a video of homes back in the market

[@WinTheHouseYouLove]

Like homes that were pending and then put back on the market?

[@clara7920]

Yes exactly. Happening here in NYC and NJ

[@brendao6020]

So we’re looking into new construction here in CA we went FHA but the preferred lender offered us a better rate and our relator said that’s all talk and will come with a price. So now I’m confused 😕

[@meshisha77]

Great info but what im not clear on is how to finance the upgrading. There are many videos on the process but everyone kinda skips over the financing process. Is it because each builder os diff. So you put down ur earnest money n proceed to choosing a lot and upgrades n structural changes. But i hear some builders require cash 10% upfront for the upgrades. How do you finance the upgrades? How do you ensure ur loan will cover it? What should i ask or look for? Still looking at models and the starting prices are outrageous. Need cushion for upgrades. Thoughts? Thx

[@missrachelrue]

That was a question I had too!! How did it go/going for you?

[@MortgageMike305]

Great points, especially here in Florida!

[@WinTheHouseYouLove]

Thanks for watching!

[@NguyenTran-qb6ls]

Hi Kyle, thanks for the video. I'm considering buying a new construction, so your video is very helpful. If I down less than 20% for conventional loan, is there a requirement that I have to have an escrow account for tax and insurance? If so, how do lender know how much tax to estimate for the escrow account?

[@WinTheHouseYouLove]

Thank you so much for watching!! :) For most lenders you'll be required to have an escrow account. They can only use what's reported from the county, so your taxes will be low to start. Once your home is assessed, your taxes will increase.

[@MaturityMe]

Thank you for this video! We're buying new construction home.

[@WinTheHouseYouLove]

Thanks for watching! Best of luck!

[@graphic9876]

Hi KYLE, would you find it useful to create video on building a house (custom built)? I think it will be super cool thing to do

[@WinTheHouseYouLove]

Hi! Thanks for your suggestion, I'll add this that to my video to-do list. Thank you!

[@graphic9876]

@@WinTheHouseYouLove thanks. You got a subscriber

[@hopejordan2386]

I really enjoy your videos. I would like to purchase land and buy a home kit. I will have to hire contractors to build it, HVAC, electrical, plumbing etc. Could you tell me which type of loan would be best? Thank you.

[@WinTheHouseYouLove]

Thanks! A construction loan is best :)

[@jomalinsdiary9373]

I just sigb a contract to build a home. They ask me to ask for 1k usd to hold down the price and the dp of the house which is 3.5 convitional and to be paid 15 days before closing, its 6 months before the turn over. We gonna use thier preffered lender and the lender will pay the closing cost. I think its a good deal.

[@WinTheHouseYouLove]

Great!

[@fernandooliveira3812]

Great video! I have a question: when will start paying for the mortgage of a new home?

[@WinTheHouseYouLove]

For new construction, after you close :)

[@jordaynerjr]

@@WinTheHouseYouLove is there a closing cost if you built the house with a builder

[@jasoncooke7428]

Hello I purchasing a Home with classic I gave them a down payment for the land in February of 2021 it's now May and they are still talking about they don't have a permit what should I do?

[@WinTheHouseYouLove]

Know your options, follow it up again and make sure to communicate that you have a timeframe. :)

[@carlosovni7100]

This applies to modular homes ? Thanks!!!

[@WinTheHouseYouLove]

Yep!

[@joshlloyd197]

Can you give me any information on a construction to permanent loan, my wife and I are looking to do so with a local builder in our area, and it involves a land home package or builder tie in so to speak...thank you

[@WinTheHouseYouLove]

I'll add it to my video list :)

[@rabmakz2564]

@@WinTheHouseYouLove Me too. I’m interested with this topic.

[@angelicamichelle827]

Yes very interested in using a fha construction to perm loan since it closes once at the beginning of the process.

[@regandoamente]

You should work for these meditation apps, Your voice is so calming haha

[@WinTheHouseYouLove]

Thanks for watching! :)

[@laurasmith9638]

I find they ball park those taxes higher based in some computer program they jot numbers into,,

[@WinTheHouseYouLove]

Interesting

[@seathchoeun1154]

What about the previous home owner not pay the property tax, then they sent tax bill to the new owner, do the new owners have to pay that property tax?

[@WinTheHouseYouLove]

Usually, but depending on the state you are located at, property taxes are prorated between the buyer and the seller during escrow. As a new owner, you are responsible for any taxes that were not paid as of the time escrow closed. You can also ask your Tax Collector about the guidelines. Best of luck!

[@seathchoeun1154]

@@WinTheHouseYouLove thank you.

[@jasoncooke7428]

I've reached out to them in regards to the contract date but they're saying that the person in Pennsylvania has not drawn up the septic tank design and it's been 90 days and that's what's holding up everything the septic tank design what do I do

[@WinTheHouseYouLove]

Communication is the key. Best of luck! :)

[@jasoncooke7428]

Well once again my question is they keep talking about they don't have a design for the septic tank this was 90 days ago can I find somebody to design my septic tank so that we can get the building permits

[@eltalizaire5241]

I have a question if a builder is not giving you no incentive with their lender is it worth it to use their lender or can I shop around for better quote?

[@WinTheHouseYouLove]

You can always shop around

[@eltalizaire5241]

@@WinTheHouseYouLove ok thank you they told me it’s two late but I have two months to close

[@xXSinCityDivaXx]

This is the best video on the subject, hands down. Great job.

[@WinTheHouseYouLove]

Glad you think so!

[@Porterfamilylove]

Are down payments typically 20%?

[@WinTheHouseYouLove]

It depends on the builder and if they want a deposit

[@allieneri]

Thank you for explaining all of this!!! I have a question: is the 5% deposit you’re paying in addition to the down payment or are they the same thing? If they’re different, is that 5% going toward your payment of the house or is it more like a fee?

[@WinTheHouseYouLove]

You're welcome! The deposit will count towards your down payment

[@allieneri]

@@WinTheHouseYouLove got it, thank you!

[@KBradAdams]

I want to know what the loan company is supposed to do on their end. We are using the preferred lender to get some money toward closing but this bank keeps asking me questions like when will the home be ready for the final inspection for the appraisal. I keep saying don't ask me you are the preferred lender you should be asking that question. Ask the builder ask their agent... why am I having to do this. Can you shed some light on this question. Thanks,

[@WinTheHouseYouLove]

Hmm that's frustrating! Ideally the lender should be in contact with your agent. Can you email your agent and your loan officer and make sure they connect and communicate about these things?

[@KBradAdams]

@@WinTheHouseYouLove Thanks for your reply, What about the builders agent why is the "PREFERRED" lender not in contact with the builder and his agent. I have CCed the builders agent over and over and she never replies or gets involved. My agent is involved but the loan officer is a mess. We have purchased several homes in our life and 4 of those were new construction and I have never seen anything like this.

[@WinTheHouseYouLove]

I'm not sure, that's very annoying though!

[@KBradAdams]

@@WinTheHouseYouLove I finally told them I will let them talk to each other, I should not be doing this. I have bought several new home builds and never had to do this ever. They finally seem to be talking now. Waiting to walk through in 14 days but who is counting.

[@phogettaboutyu]

Can you pay the closing cost with a credit card?

[@mandypdx]

No :)

[@amanda9194]

Almost 2 years ago I co signed on a car loan for my sister. She has never missed a payment. Is there anyway to get that debt excluded from my DTI ratio without having to refinance the loan or paying it off?

[@WinTheHouseYouLove]

Yes! As long as you can prove she has been paying the car loan on-time for the past 12 months (usually with bank statements), it won't be included in your debt-to-income ratio.

[@amanda9194]

Thank you!

[@mmmmmMuffinz]

Are there new construction homes that DON'T have an HOA ?

[@andrewmilligan5600]

Yes!

[@AliasProductions801]

Yes. Most of the time you have to buy your own lot first.

[@WinTheHouseYouLove]

Yes, but it sometimes seems few and far between

[@royyalkulturefinancial6265]

Nope. Doesn't seem like it.

[@JustChuck1t]

I thought there was a tax abatement...?

[@WinTheHouseYouLove]

Depends on your city

[@royyalkulturefinancial6265]

I'm tired of seeing all these Specs homes. You can't pick nothing. So its not a dream home

[@WinTheHouseYouLove]

Spec homes aren't really meant to be fully customizable. That's more in line with a custom builder :)

[@mspuertomami]

You need to ASMR

[@WinTheHouseYouLove]

Hahaha Thanks for watching!