3 additional steps you may need to take when buying a new build home


When my husband and I decided to buy a new home 10 years ago, we knew the process would be very different from buying a regular home. After all, we were buying a house that had yet to be built.

The advantage was that we had the possibility to customize the interior of our house according to our needs and our tastes. For example, we were able to install an additional full bathroom in our downstairs and choose everything from flooring and countertops to wall colors. The downside, however, was that we had to take extra steps to get our offer approved and qualify for a mortgage.

If you are purchasing a new build, you may need to proceed as we did.

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1. Get pre-approved

It isn’t always necessary to get pre-approved for a mortgage when buying a home, but if you’re buying new construction, expect to take this step. A pre-approval letter is proof that you qualify for a certain mortgage amount, at least in theory. To be clear, getting pre-approved doesn’t guarantee approval for a home loan, but if your financial situation doesn’t worsen between getting that letter and entering into a mortgage, you shouldn’t. not encounter any problems.

In our situation, we had to present a pre-approval letter from our mortgage lender before our builders start working on our house. After all, our builders were customizing the property to our specifications, so they needed reassurance that we were viable loan applicants who would be able to purchase the house once it was completed.

2. Get conditional approval

While my husband and I did not need conditional loan approval to move forward with our new construction purchase, it is a step that some builders may require. Conditional loan approval means that your mortgage application has gone through the underwriting process and the loan is approved for closing, provided certain conditions are met. These conditions may include maintaining a job on the closing date or appraising your home (once completed) for a certain value.

The good thing about conditional loan approval is that it’s not really more work on your part. You’ll need to provide your lender with certain documents for an insurer to review, such as bank statements, pay stubs, and copies of your recent tax returns, but you’ll still need to take this step to take out a mortgage.

3. Deposit 20%

It is possible to buy an existing house without paying a 20% down payment, but when buying a new construction you may need to pay 20% or even more. When we bought our house, my husband and I had to pay 20% off the purchase price of our house, even though we both had excellent credit scores. This was necessary to give the builders a greater guarantee that the deal would not fail.

In some cases, you may be able to put down a lower down payment on a new home, but check with your builder or real estate agent before you venture into a property that no one has lived in before. If you can’t get to that 20%, you may have to move on.

Buying a new build has its advantages (features that you can choose yourself) and disadvantages (potential construction delays and associated stress). If you are interested in buying this type of home, talk to your builder and find out exactly what is expected of you to avoid any unpleasant surprises along the way.

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