To start with the basics: A new construction home is any property that has not been occupied since it was built. If you are buying from a builder, your new construction home most likely started out as a simple plot of land. One day, a keen-eyed developer came along, purchased the land, and divided it into buildable lots. They then sold the land to a builder who invested time and money to construct homes on each lot that could be sold to homebuyers for a profit.
There are generally 3 types of new construction homes: custom, semi-custom and spec. A custom home allows you the most creative control over the design of your new home. In fact, you can work with an architect to have your say over every single detail—even the way your doors swing.
Semi-custom lets you pick a few different options for the home but is limited pretty heavily.
Finally, if you’d prefer not to think about custom, you may decide to move into a spec home, which is move-in ready, built out with the kinds of features designed to appeal to just about anyone.
It’s tricky, but there is a clear distinction between construction loans and home loans for new buildings. A construction loan is used to literally finance the creation of a building. For instance, if you wanted to buy the raw materials to build your own house, you might take out a construction loan to help support your purchases. A home loan for a new construction is when you borrow money for the purpose of buying a home from a builder.
You can close on your home loan as soon as construction is complete and a Certificate of Occupancy has been issued. Eager homebuyers have been known to apply for loans before the foundations are even poured. There’s nothing wrong with a little proactive planning, but keep in mind that our longest rate lock period is 75 days out from closing. If you exceed this timeframe, there’s no guarantee you’ll be able to secure the home loan and interest rate you wanted.
Just because you’re planning on purchasing a new home doesn’t mean there won’t be anything wrong with it when you move in. You can hire a home inspector at any stage of the construction process, and it’s often recommended that you contract their services at least twice: once before the foundation is poured and a second or even third time after the walls go up.