Buying a new home can mean many things. It could be a brand new home or one that’s new to you. There are lots of reasons to consider a brand new one—like getting exactly what you want and in the right location. To make it easier to understand what’s involved, here’s a step-by-step guide to buying a new construction home.

Step 1: Choose the type of new construction home.

“New construction” refers to any home that is brand new, never having had anyone living in it. But there are several types of new construction to choose from: a tract, spec, or custom home.

Tract Home

A tract home is one that is built within a subdivision, also referred to as a “community”. These neighborhoods are usually located in suburbs and developed according to a plan. There may be one or more builders selected to build there. With a tract home, you choose the homesite from the available lots. Then you decide on the floor plan and select the details. 

You cannot bring your own plan when you choose the tract home option. The builder relies on the plans they’re familiar with, and those that fit within the costs and options offered in the subdivision. When you provide your own floor plan, there’s a risk of having errors that aren’t discovered until it’s too late. Then, the costs to fix those plan mistakes come at your expense—in both time and money.

Spec Home

A spec home is one that is either already under construction or completed and ready to move in. Builders call these homes “quick move-in” or “move-in ready”. It’s all new construction and no one has lived in it yet.

With a spec home, the details have already been selected. Depending on the building stage it’s in when you view the home, you might be able to choose a few finishes, like wall colors, lighting and plumbing fixtures, and the appliance package. In many cases, the builder orders all the materials and finishes before they begin construction.

Custom Home

A custom home—also called “to be built” or “pre-sale”—is constructed to the buyer’s specifications. You select the lot, the floor plan, and the details, both inside and out.

A custom home can be one that is built to your floor plan or a home that is built for you within a subdivision. If you opt for a subdivision, you will choose from the builder’s portfolio of home designs. This doesn’t have to be restrictive though! A builder who is experienced with developing communities of new construction homes understands how to offer versatility. New Home Inc., for example, has created a variety of elevations—architectural styling—for every one of our floor plans. Our buyers are happily surprised to see how a few changes in the exterior can transform a Craftsman style home to a Farmhouse, French Country, Traditional, English Country, or Coastal architecture. And this flexibility ensures that your home stands out from the rest in your neighborhood.

Step 2: Get pre-approved for a mortgage.

Before you look at homes or floor plans, take the one step that will ensure peace of mind that you can afford the home you want. Mortgage pre-approval is a simple process where you speak with a lender to determine if you qualify for a home loan and how much the lender believes you’ll be able to borrow.

The lender will ask you a few questions about your financial situation, such as income, savings, assets, and debt. They will check your credit report to see your current credit score, a major factor in determining creditworthiness. You’ll need to provide a bank statement, proof of income (such as a check stub or digital record), and income tax returns for the most recent 2 years. The pre-approval notification usually comes within 48 hours. If approved, you’ll receive a letter stating you’re qualified for a mortgage of up to a defined amount. Always present this letter to the seller, because it shows that you are a serious and qualified buyer!

If you’re feeling a little anxious about the mortgage pre-approval, you should realize that there are a wide range of loan programs available. If you have a credit score that isn’t enough for a conventional loan, ask your lender about other programs, like FHA home loans. And you also don’t need a 20% down payment to qualify for a home loan. Talking to a lender is a good step, because you’ll learn what’s required to get a mortgage and can then shop for homes with confidence.

Some builders work with a “preferred lender”. This finance professional understands the steps involved in buying a new construction home. Preferred lenders might also offer incentives, like closing cost credits or a rate buydown.

What is a rate buydown? How do I get it?

A rate buydown is an option for the seller or buyer to pay for discount points. These points are applied at closing to reduce the interest rate. One point lowers the rate 0.25% and usually costs 1% of the loan amount. So, if you’re financing $350,000, each point would cost about $3,500. You can use a rate buydown on a temporary or permanent basis. A 2-1 rate buydown, for example, reduces the interest rate on your loan by 2% for the first year, and then by 1% the second year. It then reverts to the full rate for the remainder of the loan.

A permanent rate buydown lowers the rate for the entire term of the fixed rate loan; e.g., 15 or 30 years.

Currently, when you buy one of New Home Inc.’s quick move-in homes for sale near Raleigh, NC, we pay for the rate buydown to reduce your interest rate for the entire term of the mortgage. With our rate buydown program, your mortgage interest rate goes as low as 4.75% on a 30-year, fixed rate home loan. You pay nothing extra for the reduced rate. If you’re house-hunting in the Raleigh suburbs, be sure to talk to us about the rate buydown.

Do I need a construction loan for a new build?

Here’s a common question from people who are thinking about having a home built. Do I need a construction loan?

If you are planning to build your home in a subdivision where the builder owns the land, you do not need a construction loan. Unlike a conventional construction loan when there is a risk the home won’t be completed, the lender is confident that the home in the subdivision will be finished, which protects their investment. A bank doesn’t want to hold the loan on a home that can’t be sold! 

When you buy a new construction home from a builder in a subdivision, you finance the home and the lot it will be built on in one loan, just like a conventional mortgage.

With a true custom-built home, you’ll need to purchase the land first. You’ll then need a construction loan to finance the cost of building the home. When the home is approved to be occupied, you convert the construction loan to a mortgage.

Can I lock in my rate before the home is move-in ready?

Rates are a critical factor in the homebuying process. Most lenders will not lock in the rate until your home is within 60 days from the actual closing date. An extended rate lock could be an option, but it comes with a fee. Talk to your lender about when and how to lock in your interest rate.

Step 3: Choose your homesite.

You choose your home’s location before the home itself. But it is helpful to have a good idea of the home you want to build so you can ensure the home will work on the chosen site. Do the features of the land—such as slopes—accommodate the footprint of the plan?

Within a subdivision, you’ll review the site map to see what lots are available. Look at the size of the lot, the shape, and the location. Do you want to be close to community amenities or add a little distance there? Would you like the privacy of a cul-de-sac lot, the spaciousness of a corner lot, or a smaller piece of land that’s easy to maintain? Do you want mature trees around your new home, a wooded lot, or maybe something with no neighbors behind you?

As you’re considering the homesite, walk around and look at the views from various angles. What will you see when you’re sitting on your porch or back deck?

Step 4: Select the floor plan.

Now we’re getting to the really exciting part! Looking at floor plans is the first glimpse of your new home. It’s just a drawing at this stage, but reading a floor plan allows you to envision the flow of the home’s interior. You see where the bedrooms are located and the proximity to other spaces. You consider all the functional places, like the kitchen, living areas, bathrooms, and laundry. Check out the measurements to see how it compares to your own vision.

If you’re looking to build your home within a subdivision, the builder might have a model home you can tour. Or maybe they’ve built this floor plan in another neighborhood. It’s nice to be able to walk through the actual home and get a feel for it. Another option is to use a virtual tour, which lets you view images of each room and from every angle, pulling back and zooming in, turning a corner and going up and down the stairs.

Here’s a tip before you look at floor plans: Create a wish list of the most important features you want in your new home. Be clear on the priorities. It’s easy to be influenced by a new home’s floor plan, but when you respect your most important details, you’re certain to avoid regret later. 

Step 5: Sign the contract.

You’ve chosen the community, site, and floor plan. With all that completed, the next step is to agree to purchase the home. This is done by signing a purchase and sale agreement, a contract to buy the lot and the home as detailed. The contract outlines the conditions of the agreement, such as the rights of the buyer and the seller, the location of the property, the floor plan, the expected completion date of the home, and the obligations of the builder to build the home and the buyer to buy it. This is not the same as the actual purchase agreement, which is signed at closing.

Before you sign the purchase and sale agreement, consider having a real estate attorney or your Realtor review the terms. This step could potentially ensure you’re getting exactly what you expect.

Do I need to pay a deposit with the signed contract?

You will likely be asked to put down a small deposit—known as a “good faith deposit” or “earnest money”—when you sign the purchase and sale agreement. The funds are placed in an escrow account, to be held while the home is being built. That good faith deposit may be applied to your down payment, which is paid at closing.

If you cancel the contract, you might forfeit the earnest money, depending on the reason, such as the house doesn’t meet inspection. Simply changing your mind will cost you the good faith deposit. The reasons for allowing the refund will be detailed in the purchase and sale, so read it carefully!

What should the builder’s warranty cover?

A significant benefit of purchasing a new construction home instead of a resale is the peace of mind that comes in the form of a builder’s warranty.

Your purchase and sale agreement should include information about the warranty included with the home. A builder’s warranty protects you against structural defects and damages for the first year. If there’s a problem with your home’s structure, it will most likely show up during this time. The coverage also provides for certain minor fixes, like repairing trim, within the first 90 days.

Systems like plumbing, electrical, and HVAC should be guaranteed by the company installing them. Major appliances are covered by each manufacturer’s warranty. Do not sign the contract unless you are made aware of all warranties!

Some builders extend the warranty, as long as 10 years from your closing date. The longer coverage protects you against major damage, like a collapsed roof or problems with the foundation. Normal wear and tear isn’t included in the coverage. 

New Home Inc includes multiple warranties on our homes, including a 1-year and a 10-year structural warranty. We’re confident in the quality of our construction, methods, and materials.

Step 6: Decide on the finishes.

What’s next in the step-by-step guide to buying a new construction home? This is the best part! Choosing the floor plan is fun, but selecting every detail that goes into your home is like being a kid in a candy shop. You’ll tour the builder’s showroom or visit specialty stores, like lighting, plumbing, flooring, cabinetry, and countertops showrooms.

During this step, you work with a professional designer who guides you through every option. Some features are included in the price (“standard features”) while others will cost extra (“upgrades”). As you browse the selections, confirm which ones are included in the price.

What standard features should I look for in a new construction home?

Every builder develops their own list of included features. Anything beyond the list is considered an upgrade. So, while you might think one home is more expensive than another, do an apples-to-apples comparison. Do they include the same features in the quoted price? If not, is it worth adding a particular detail to your plan?

New Home Inc. adopted a “Future-Proof” visionary approach to designing and building our homes. We looked at what today’s families need in their new homes. We’re living differently, using more technology, wanting more security and energy efficiency, and needing plans that use space more efficiently. 

Here are some of New Home Inc.’s standard features:

• A smart home technology package with a smart security system, whole home network panel, smart home lighting package, and smart thermostat
• Our truly unique smart door delivery center, a fully enclosed space between your exterior and interior front doors that is secured by a smart lock to protect your packages
• CAT6 cabling, which delivers a stronger, more reliable connection throughout your home to accommodate all the devices and users without dead zones or other problems
• Electric vehicle charging station rough-in that makes it easy to connect when you need it 
• ecoSelect Home Efficiency Program certification
• Whole home air filtration system, filtering particles of allergens and pollutants out of the air inside your home
• An oversized kitchen island that offers more surface workspace as well as seating on 3 sides, not just 1 or 2
• An extra pantry—which we call the “messy kitchen”—in addition to the standard one, to add a functional nook next to the kitchen that provides more space for storage, cleaning, and serving

• A pocket office near the kitchen, making it private and convenient to use as an office, homework station, media room, library, fitness studio, or private retreat
• A flex room, designed into the layout, for whatever you need it to become
• An organized drop zone in our single-family homes and townhomes, with a hall bench, cubbies, and hooks, providing a space to keep things organized
• Pet spaces, including a hideaway under the stairs and a grooming station

Even though New Home Inc. raises the standard on included features, our new home prices are still affordable! Don’t pay more for expecting more.

Step 7: Let the building begin.

Now that everything is in place, the builder will start work on your new home. The site will be excavated, if not done already. When the land is fully prepared, the foundation is poured. 

Then, the home is framed. The floors, walls, and roof systems are installed next. You can see the skeleton of your home at this point, known as a “shell”.

Exterior walls are wrapped in protective sheathing. This envelope protects against drafts and moisture seeping through the walls.

Before the walls are closed in, the electricians, plumbers, and mechanical engineers do their work. Water supply lines and sewer lines are installed. Large fixtures like a tub, shower/tub, and furnace are brought in at this stage.

In between each step, there are inspections. This protects the project from moving further and then having to go back and make major repairs.

Next comes the insulation and then the drywall. Interior fixtures are installed, like cabinets, fireplace mantel, vanities, and kitchen island. 

While the interior is advancing, the exterior is getting done. Exterior siding, windows, doors, trims, and sills are installed. The driveway and walkway are added. 

The countertops and flooring come next, followed by light fixtures, plumbing fixtures (toilets, sinks, faucets), switches, and outlets. The HVAC system is completed.

Your home then gets mirrors and shower doors. All the door and cabinetry hardware is added. 

Landscaping is finished. Clean-up is done, inside and out. Your home is ready!

How long does it take to build a new home?

The time it takes to build a new home varies from one builder to the next. Some factors that impact the timing are the weather and availability of materials and skilled labor. Buying a new home from excavation of the site to the completion averages 6 months. Discuss the schedule with your builder.

A home that is already under construction certainly will be completed sooner. Depending on its phase, the home might be ready within a few weeks—one more advantage to buying a move-in ready or quick move-in home!

Can I make changes during the building process? 

Once you commit to the plan and selections, you should not expect to have the flexibility to make changes. Materials are ordered early. And structural changes are normally not possible once the foundation is poured. While you might think your request is a simple one, the home building process is a carefully planned one. One task is contingent on another being completed, so changes can create a domino effect. The result is usually more cost to you and a delay in your home’s completion.

So, if you have any questions or feel hesitant about details, talk to your builder before signing the contract.

Step 8: Finalize the home loan.

As part of this step-by-step guide to buying a new home, you need to understand when you’ll actually apply for the home loan and schedule closing.

When your home is approximately 30 days away from completion, you’ll close on your loan. One of the benefits of working with a builder’s preferred lender is that they have experience with financing a home that is being built for the buyer. This professional knows when it’s time to process the loan to avoid any delays in closing. For example, they know when to request the appraisal and inspection that are required to complete a home loan. A preferred lender has worked with the builder and has good communication, which helps with a timely closing.

Before the closing happens, your home loan must go through underwriting, which is the process for thoroughly checking your financial situation and verifying the details required for approval of your loan. Remember, mortgage pre-approval is NOT a guarantee that you will qualify for a loan; it’s a fair approximation of your creditworthiness. If something happens between pre-approval and the actual loan application—like losing income—your status may change.

Keep in touch with your lender throughout the home building process. Make sure they’re managing the steps required, so that you can move into your new home as soon as possible.

Does closing on a construction loan differ from a home loan?

Financing a custom home is not the same as contracting to build a home within a subdivision. With a custom home, you’ll start with a construction loan that converts to a home loan. At some point during construction, your lender may require conditional approval from the builder—such as confirming a completion date or providing evidence of using qualified subcontractors.

Before you close on the purchase of your custom home, your lender will verify the completion by sending an inspector to the site or requesting photos.

Step 9: Do the final walk-through.

The day before your scheduled closing, you will walk through your home with the builder or a representative, like the project supervisor and the sales agent. The purpose is to familiarize you with the details of the home. Learn which switches control which lights, test the plumbing, and learn about the appliances. You’ll be given the instruction manual for every system and appliance. 

Expect the walk–through to take a couple of hours. You’ll want to be thorough in your examination of the details. Check for flaws, nicks, cracks, and anything that isn’t level or aligned. Make sure every outlet works (bring along a hair dryer or phone charger to plug in).

Outside, look carefully at the exterior finishes, including the siding, doors, windows, and trim. Inspect the landscaping and irrigation system. Turn on the outside faucets. Look closely at the driveway, walkway, and outside living spaces.

During the final walk-through, the builder will take notes on any repairs to be done and when they will be completed. This is your written record so keep a copy!

Step 10: Close on your new home.

The final step in this step-by-step guide to buying a new home is actually buying it! That happens on closing day.

You’ll sit down with your lender, the builder’s representative and their closing attorney. The title agent might also be present, as well as your real estate attorney, if you’ve engaged one.

No longer than 3 days before your scheduled closing date, your lender will give you a closing statement. This document confirms the terms of your loan and details the closing costs, which will be paid on or before your closing date. Review the closing statement carefully to ensure it reflects the terms and costs you expect.

Closing costs include:

• Down payment, which can be paid with a cashier’s check or wired to the account, as directed by the lender
• Appraisal
• Title search
• Loan origination
• Real estate attorney
• Property tax for the remainder of the tax year from the closing date
• Recording 

The complexity of this level of transaction will require that you review and sign a lot of documents. But once you’re done with it, the builder hands over the keys to you. Congratulations, you’re a homeowner!

Find your new home near Raleigh, NC

Are you confident in your understanding of what’s involved with buying a new construction home?

New Home Inc makes it even simpler to find exceptional new construction homes for sale near Raleigh, NC, including our expanding inventory of quick move-in single-family homes and townhomes. As a local homebuilder, we know the region and have chosen popular Raleigh suburbs. We’re building communities in Angier, Clayton, Fuquay-Varina, Lillington, Smithfield, and Willow Spring.

Our goal at New Home Inc. is to offer choices and the flexibility to find the home that fits your lifestyle, without compromises. We’re here to assist you with every step of your journey, whether you let us build your home or choose one of our move-in ready homes. We make the new home buying process easy and enjoyable! 

Contact the experts at New Home Inc. to move forward on buying a new construction home.