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Down Payment for Buying a New Construction Home

A newly constructed home appeals to property buyers for many reasons. Buying a brand new construction home means zero problems with previous owners, new appliances working efficiently, and choosing the features you like. A resale property deal may not give you such advantages. Buying a newly constructed home is more complicated than a resale building, but an experienced agent can help you through the process. 

Down Payment for Buying a New Construction Home

Benefits of Using an Agent  

Many people do not prefer using real estate agents because they want to avoid paying a commission. They may also feel that the agent does not offer a good deal. However, in the preconstruction stage, the buyer does not have to pay any commission. Instead, the builder takes care of it. AS A BUYER, WHETHER YOU ARE BUYING A RESALE OR PRECONSTRUCTION PROPERTY, THIS IS THE SAME IN BOTH CASES. Many real estate agents specialize in pre-construction homes. Your agent will highlight all the best developments that are available in the market and offer suitable deals that you can choose from.  

 Research the Builder  

A good realtor can tell you which developers you can trust and the ones you should avoid, though you must do your research as well. Quite a few developers are well-known and reputed but you must check the number of projects that they have completed successfully. Any projects that are delayed or canceled should also be checked thoroughly.  

Some builders look great on paper and offer fantastic deals but many of these end up getting canceled. So, it is important to know if the developer has a good reputation and has a good history of successful projects or not. You can check out reputed builders and developers on the Save Max. Many new developments may be delayed because of the current pandemic, but you can be sure their projects will stay on track.  

Payment Schedule for New Construction Homes  

The payment schedules for new construction homes can be quite prohibitive if you haven’t planned your finances. You will need to pay a 20% percent deposit over 2 to 4 years for a new construction home.  Though the deposit is fixed at 20%, various builders offer different deposit structures and payment schedules. Here is an example of a deposit structure. 

The buyers can pay the home down payment in 4 installments:   

  • 5% percent deposit should be paid on signing  
  • The second 5 % should be paid within 6 months of signing 
  • The third 5% will be due within a year  
  • The final 5% amount should be paid within 2 years   

 This is a significant amount of money that you need to pay before you can move into the property. If you have the resources, then buying a pre-construction property will not be a tough decision. However, always ask for the breakdown of a payment structure so you can schedule all the deposits in a timely fashion.  

No Bidding War  

There is no bidding war as the purchase happens on a first come first basis. There are no chances of multiple buyers competing against each other or price revisions. The price that is listed will be the final amount that needs to be paid.  

Increase in Price of the Property at the Time of Possession 

By the time you move into the property, the housing market may look different and you cannot always predict or anticipate the future value. By the time construction is completed, the value may have increased. However, in a few cases such as the condos being finished in bigger cities, the prices may go down. Property values depend on the project, its location, and other factors. Keep an eye on current real estate trends and you can make better decisions.  

Negotiations and Upgrades  

Before you make a home down payment, check the model of the house. You can see the units being rendered, and what you see may not be what you are getting. Look carefully at the home layout and room sizes, and make sure you know what you are buying. Ensure that you do not need any additional renovations. Ask for both the standard and upgraded features along with the costs so you have a precise idea of what is included in the sale price.  

Negotiations are based on the upgrades you want. Usually, a few design options are on offer which can be customized as per the buyer’s needs. Choose from the standard packages so you do not have to compromise on necessary upgrades, Also, choose smaller changes, like adding an additional bathroom. You can save a little by making these choices, while you buy a new home.  

Assignment Fee 

Many investors buy new construction projects and sell them before the actual closing, to make profits. This is called an assignment sale. You should know how much the assignment fee is, and whether it is free or not. A lot of builders offer free assignments as an incentive. You can always negotiate for a waiver of the fee if this is not offered. 

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    Inspection of the Property and Warranties Check  

    Even if the property is new, you must always inspect it. A good inspection helps you to understand if the property is up to the mark or not. Everything should be in order and there should not be any code issues. If there are any code issues, the builder should fix them. You can discuss this with your agent, who will tell you about your rights.   

    Apart from the inspection, you need to check on warranties. There should be manufacturer warranties for all the new appliances. A builder warranty is also included for a new home via a third-party warranty company. The agent should explain the warranty cover and check the details properly before the contract is signed.  

    Conclusion: Buying a new construction home can be rewarding but be prepared for delays and differing mortgage terms.  It is important to make sure that the down payment is budgeted for and available. Think of the long term, take the help of our realtors on https://savemax.com, who can help you make the most beneficial deal at the end of the day. 

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