Your New Construction Home

The first step in making the move to your new new construction home is deciding if you want to build your new home custom or buy a new construction home that is in the stages of being built or just completed. This is commonly known as a “Spec Home” or a home pre-designed and built by the builder. There are advantages or disadvantages in either choice.  Having a real estate agent on your side in this whole process, discussing all the options early on, guiding you through the process, being there with you as you do your final walk through and get your keys at closing is especially important.

The advantages of choosing to buy a spec home is that it is completed or nearly completed, and you do not have to wait as long to take possession of your new home.  Additionally, there are often models of the home or you can see the home either completed or near completed. This is a good option for those that may not have the best abstract vision for floorplans or design, meaning you cannot see the result on drafts or floor plans etc.  Finally, you have a better opportunity to shop for the right new construction home with a spec home provided there are enough on the market at the time you are ready to buy.

The disadvantages of buying a spec home are that you may not get to choose building materials and the quality of those materials. In a spec home the price quoted is specific to certain building materials, finishes and accessories and often, but not always, those are inflexible.  Also, there may be limitations as to location and style of your future spec home e.g., walk out basement, daylight etc. based on lot availability. However, this may be the case with spec or a custom home regardless when seeking out a lot to build on.

Custom Home

The advantages of choosing to build a custom home with a builder is that you have input from the start. In building a custom home you have more flexibility on choosing location, if there are lots available in the area you want to live. Further, in deciding where you are building your future custom home it will need to fit the lot in size and style (ranch, two story, walk out basement etc.). This is also a good time to mention that if you are choosing a lot in a development you will want to look at the covenants to see what requirements there are when building your new home. In some instances, your home must be a certain square footage, certain exterior materials e.g., a percentage of stone etc.  Also, is the lot in a development that will have a Homeowner’s Association? what will the HOA fee be per year? What will that fee cover etc. Once you have chosen your location you can start to look at the design of your home and what the floorplan will look like. You can choose from pre-made floorplan drafts and modify if need be from them or enlist an architect to draw the design from scratch. Once floor plan is decided, you can start to look at fixtures, flooring and other finishes.

Perhaps the step that should be discussed before type of construction or location is financing. Depending on rather you choose to buy a spec home or build a custom home may affect how you approach financing your new home.

Choosing to buy a spec home can make the lending process a bit simpler as you are simply buying a home no different than any other. The builder owns the lot and the improvements on that lot and is selling that to you at a set and pre negotiated flat price. You simply get a pre-approval and begin the mortgage loan process and generally close in 30-60 days. The caution here is that if you buy a spec home that is in the process of being built and for some reason there is a delay, you could potentially lose your lock rate on your mortgage.  However, you may be able to extend the lock period and a fee may be involved to do so.

In financing a custom home that you are either choosing to be the general contractor or are hiring a custom home builder there are a couple of options.

You will need to get a construction loan that covers the cost of building the home while it is in process (usually 6 mos. To 12 mos.) and depending on the loan type you may be required to put down 20%. There are two different types of construction loans, one that rolls directly to a regular mortgage “automatically” and one that is a stand-alone construction loan that you will then need to obtain a mortgage loan separately.

The construction loan should have an initial amount funded to get your build started and then draws as the contractor needs to cover expenses. Ideally, your escrow company handles the funding and draws throughout the build.

Prosperity Home Mortgage 

Monica Ledbetter

Mortgage Consultant

NMSLR ID 1784652

Cell: 402-525-8412

Office: 402-848-5631

Website Contact or Apply Here

CharterWest Bank

Shari Barnhill

Mortgage Loan Officer

NMLS ID 217460

Cell: 402-202-6267

Office: 402-488-2222

Website : Contact or Apply Here

Lincoln Federal Bank

Chris Elgert

VP, Mortgage Loan Originator

NMLS ID 489506

Cell: 402-202-9246

Office: 402-421-8929

Website:  Contact or Apply Here

Should you choose to build a custom home it will be likely that you will be involved in all stages of the build and again having a real estate agent alongside you are important as they can be an intermediator between all the involved parties as your new home is being constructed. You will have decisions to make throughout the process and having another person to discuss options can be extremely helpful.

Once your new home is completed you will have an opportunity to have an inspection done of the home by a trained home inspector. Often people think that an inspection is not necessary as the home is newly constructed. That is not true, and it is recommended to have an inspection to catch issues that may have occurred during the construction process. This is important as generally the builder provides a warranty on the construction of the home and items that need to be repaired, you will need to see what their warranty covers and the timeframe of the warranty. There is also an option to purchase a home warranty apart from the warranty that is provided by the builder and again that is something that can be discussed with your real estate agent.

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