Buying March 29, 2023

Buying a New Construction Home

You’ve got several options to choose from when buying your next home. With existing homes, it’s in sellers’ best interest to spruce up their properties, so they’ll usually complete some kind of upgrades, curb appeal projects, and remodeling before hitting the market. A new construction home, however, has no previous owner; it comes brand new. Learning about the new construction buying process will help you understand how it differs from other types of housing, such as existing single-family homes, townhouses, condominiums, etc. 

What is a new construction home?

New construction homes are kick-started from two primary sources: the homeowners themselves and developers. When a homeowner is having a home custom built, they work with contractors to build it to their desired specifications on a lot they’ve purchased. This tailored approach comes at a price; building a custom home generally costs more than purchasing a new build from a developer.

When going the developer route, buyers have options to choose from, namely tract homes and spec homes.

Tract homes make up new neighborhoods on land bought by the builder. They bear a strong resemblance to each other but may offer customizable floor plan and design options to tailor the home to the buyer’s liking.

Spec homes are finished, move-in-ready new builds. Though they offer little to no customization, they may be the right option for you if you’re looking to move right away.

There are four component parts of building a new construction home: land, labor, materials, and regulation. Builders combine those costs to determine what price they need to sell the home to make a profit, accounting for local real estate market trends. However, if the market is driving up those costs, builders are less likely to continue building. As a buyer, keeping tabs on the housing market will help you understand the landscape of available new construction homes.


A row of tract new construction homes in a newly developed suburban neighborhood. The home in the foreground is finished, the rest in the row are framed but without siding.

Image Source: Getty Images – Image Credit: jhorrocks


Pros of a New Construction Home

  • New materials, appliances, and fixtures
  • Customization without having to remodel
  • Less maintenance than an older home

Cons of a New Construction Home

  • Custom home costs can be high
  • Move-in date dictated by builder’s timeline
  • Market conditions can drive up prices/halt production

Buying a New Construction Home

The financial preparations you’d take for purchasing an existing home apply to buying a new construction home. You’ll get pre-approved for a mortgage early on and form a saving strategy for how to make a down payment.

There’s less room for negotiation in new construction home transactions, so you and your agent should thoroughly discuss what kind of offer you’re able to make. Your agent is your greatest asset during this part of the process; lean on them to understand how to make an offer. You’ll also want to know whether a home warranty comes with the purchase of the new construction home and its cost structure.

Even though these homes are brand new, it’s still worth it to get a home inspection to discover any outstanding repairs that need to be made and begin a dialogue with the builder about fixing them before you move in.

Going into the buying process, it helps to know which new construction homes you’re able to afford. This allows you and your agent to work together to find the best candidate properties. To get an idea of what’s affordable, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different down payment amounts to get estimates of your monthly payment for any listing price.



­­­­­­Featured Image Source: Getty Images – Image Credit: Kirk Fisher