Frequent Questions to Consider When Building a New House

Does this sound familiar?   You bought your first home eight years ago.  You never intended for it to be your “forever home” so you have been waiting for the opportunity to move up to something better, bigger and more fitting of your lifestyle and family.  You know too that the only way to get the house of your dreams is by building a new house   Now,  after putting up with your less than perfect house, the time has finally come to realize the next step.   You are ready to take the next step in building a new house!   

You make plans to visit three to four new home builders that caught your eye around town.   The weekend is fast approaching so you pull up the builder’s websites to absorb any information you can about the process.   You quickly realize that each builder seems to run their business a little different and it seems that there are dozens of questions invading your head all at once.   Before you get too frustrating with yourself, here is a Frequent Questions to Consider (FQC) to keep your mind organized for the upcoming shopping trip.  

Note: These FQC are based when building a new home on a interior lot in a planned community.   Look for future FQC on custom home building.  

How much is this going to cost me?

Cost is one of the most important questions to consider when building a new home.   You will be paying a premium for the privilege of being the first one to live in a house.   You can expect the builder to do mark ups on some items in the home (like appliances and the various options available to you). Overall, you can expect to pay more for a new home.   When discussing pricing with many new home builders, I have been told that they choose to build higher priced new homes because they make more money with them.   It is just not feasible for them to build homes under $250K (with few exceptions). 

How long is this going to take? 

Builders take different lengths of time to build a home.  I have seen some homes get built in three to four months if they are homes with few options to customize and the same floor plan is being built time and again.   It becomes easy for the builder to build these homes.  If you are building a new home where you an select many of the different features of the home, you can expect the process to take six to eight months(or longer).  It also depends on the availability of workers and materials as well as the weather.   Whatever the builder tells you, I would add some time to it.   

What steps are involved building a new home? 

Once again, builders will have different processes to build a home, but for the most part the basic same steps are used.  You can check out this article on New Home Source to get a great detailed explanation of the steps involved.   No matter what your builder tells you as far as steps, make sure to ask about being on the site with the builder.   You want to be able to easily access the site to check on quality and correctness.  Please make sure you know who your contractor is and how to contact him or her.     Building a new home is like everything else.  Mistakes will be made and you need to know how to handle the mistakes as they occur.  If you don’t know anything about building a house, ask for some help from family and friends.  You are bound to have someone in your network that has done it before and knows where to look for issues.     

What do I have to pay upfront? 

In a lot of ways, building a new home might seem easier to do than buying a resale because many builders have some good structured programs in place as to the initial down payment.    Ten years ago in the mid 2000s, builders were falling over each other to get people into their homes so some of their programs were fantastic as far as your initial down payment.  Unfortunately, these days are far gone.  Most builders will still have programs in place, but not where it seems you basically getting a home for nothing upfront.   The best thing to do is call to talk to a new homes sales person before heading out to the community.  Please make sure to ask them to explain their programs in detail and if you don’t understand something, keep asking questions until you do.   

Can I get my initial down payment refunded?

This depends on the builder and the level of customization involved in the build.   I put down some money on a new build once knowing that I wouldn’t get it back if my current home did not sell.   The builder made it very clear that refunds were not part of the program, but I could always use the down payment towards another build at a future date if it came to it.  Be sure to ask for whatever they tell you in writing.  You don’t want to get stuck with paying towards a new build that you don’t get to live in.    

How much of my new home do I get to customize? How much does the customization cost? 

Some builders will include a detailed customization of your new build.   Like with a new car, you can expect each option to cost you some money.  Unique architectural features, like a floor to ceiling stone fireplace, or curved arches, will cost you considerable more.  You might have some options that don’t cost you at all like selecting the color of your carpet or kitchen floor.  I would make sure to ask the builder specifically which options you get to pick and what costs what.  If you don’t get the level of customization you are seeking, ask if they have any other plans, or move onto the next builder. 

Do I get to select my lot? 

Unless you come in at the end of a phase of building in the community, you get a choice on your lot.  You want to make sure to pick a lot that fits your lifestyle.  If you like your privacy, you might want to pick a lot that only has neighbors to either side of you and no neighbors behind you.   If you like a large backyard, be sure to ask about how the size and the drainage system in place.   I bought a new house once where the drainage system had the entire backyard on a slope with no flat parts.  It was not a fun backyard at all, but we didn’t need it.  

Do I have to use the builder’s lender? 

This is another great question you can ask the builder before going out to the site.  You want to do this especially if you have a lender you like to use.   I bet the response will be something like, “you do if you want to realize some of the great features of our program offerings.”  In other words, if you want to take advantage of some of the builder incentives, they will require working with their lender.  However, in the long run, the builder will just want to sell you a house so you can use who you want to get your mortgage.   

Do I have to sell my current house before the builder will start building a new house? 

Yes, unless you are very well off.   Most lenders require a certain debt to income ratio.  It can be very difficult to carry two mortgages and meet their debt to income ratio requirement.    Be aware that many builders will require you to show them a MLS listing before beginning the process of building a new house.   They want assurances that you are serious about building the new house by showing them in good faith that you have listed your current residence. 

Will the builder help me sell my current home? 

No.  However, they will be happy to refer you to some trusted real estate agents to help you sell your home.  

What do I do when my current home sells before my new home is finished? 

You should always have a contingency plan in place if you sell your home quickly and your new build is not ready yet.  In the current market, there is a very good chance you will sell your home well before your new build is finished.  Talk to family and friends to see if they have space for you for a few months while you keep your possessions in storage.  There are also apartment complexes that give short term leases of various lengths.  You will just have to call around.