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e d i u G n o i t c u r t s n o C w e N www.Alfonso.com
COLDWELL BANKER ALFONSO REALTY More than 150 Agents Strong 11
FIGURE OUT A COMFORTABLE MONTHLY INVESTMENT
4 WHY DO BUYERS THINK THAT THEY DON’T NEED A REALTOR®?
MORTGAGE LOAN QUALIFICATIONS
PRICING AND NEGOTIATIONS
4 WHAT YOUR REALTOR CAN DO FOR YOU
5 LET’S LOOK AT THE THREE NEW CONSTRUCTION MYTHS IN DETAIL
WHICH OPTIONS ADD THE MOST VALUE TO YOUR HOME?
6 “TO DO” LIST FOR BUYING NEW CONSTRUCTION
14 HOW MUCH CASH WILL YOU NEED?
7 CUSTOM OR PRODUCTION— WHICH BUILDER IS RIGHT FOR YOU?
14 YOUR HOME’S STARRING ROLES 15-18 BUILDING MILESTONES
8 ON THE ROAD TO A DECISION 19
UNDERSTANDING ENERGYEFFICIENT FEATURES
WHAT ABOUT AN HOA
9 HAVE YOU DECIDED TO USE A BUILDER? 10 CHOOSE THE RIGHT BUILDER 10-11 NOW THAT YOU HAVE PICKED A BUILDER…
20-23 NEW CONSTRUCTION DICTIONARY
STNETNOC FO ELBAT
4 DO I NEED A REALTOR® IF I BUILD NEW CONSTRUCTION?
When you are house hunting, the appeal of new construction is undeniable. It provides exciting options that may not be available to you when purchasing an existing home, such as the ability to choose the exact kitchen cabinets, flooring and even floor plan you want. You get to live in a brand new home. It's full of new appliances, and the finishes were handselected by you creating your very own masterpiece. Add that to worry-free living for years, and itâ€™s even more appealing. If you are interested in buying new construction, the builder's agent will be ready to help you with the process. But make no mistake: You need your own real estate agent from the get-go. Even if it seems easy to sign up with the builder's on-site agent, you're going to want someone representing your side of the deal. As you read through the New Home Guide from the CBAR Cares Series, know that this information was provided by our team to help prepare you for this exciting venture.Â
DO I NEED A REALTOR® IF I BUILD NEW CONSTRUCTION? YES! Unfortunately, if you go forward blindly into your home purchase you will not be the first to discover that buying new construction is not as simple, or as trouble free, as you imagined. There is still a lot that can go wrong, and you can even wind up with a property that is not nearly as perfect as you expected.
New homes are popping up all over the Mississippi Gulf Coast. It’s true, new construction has a ton of advantages, but many buyers make the false assumption that they can save money by not using a REALTOR.® When you don’t have a professional real estate agent represent you, you’re just putting more money in the builder’s pocket.
WHY DO BUYERS THINK THAT THEY DON’T NEED A REALTOR®? Many assume that the builder’s representative will help them with all aspects of their new home purchase. Some believe that working directly with the builder will get them a better deal on the home. However, the builder’s representative is working for the builder, not for you! Their success relies on getting the best deal for the builder, their boss. When you use a Realtor, you are the employer.
A strong negotiator understands the real value of all aspects of the deal. Your real estate agent understands what you want and need. He or she also understands what the builder values most. Because your agent sees both sides clearly, he or she is the one most capable of negotiating a deal that will be to your benefit.
WHAT YOUR REALTOR CAN DO FOR YOU… Experience is priceless. Your Realtor understands the ins and outs of home purchasing and can work on your behalf to negotiate a better deal, free upgrades, or just whatever is in your best interest. Your agent can help guide you when it comes to the lot, location, and neighborhood. An agent who knows new construction inside and out will ask to see the lots specific site plan. From this, you will be able to gather the topography of the lot. Maybe you don’t want a steeply sloping lot? How about finding out there is a large drainage ditch in your backyard? Perhaps you will discover there is a big utility box smack dab in your front yard! Your real estate professional can help uncover the details.
Some builders have an exceptional reputation for delivering homes on time. Others are the exact opposite. In fact, one of the most significant complaints you find from those buying new construction is the builder’s inability to complete the home on time. It doesn’t come as a shocker to know how stressful buying and selling a house at the same time can be when your new home is not going to ready on time!
One of the more reassuring aspects of a good Realtor is that you benefit from his or her network of agents, vendors, lenders and other industry professionals. Word gets around when businesses or service providers don’t take care of their customers in the real estate industry.
LET’S LOOK AT THE THREE NEW CONSTRUCTION MYTHS IN DETAIL... Myth #1: You don't need a realtor when you build a
FOOD FOR THOUGHT...
new home because you can save a commission and,
Ask yourself, would you represent yourself in a lawsuit? Why then would you represent yourself in probably the largest investment you will ever make, your home?
therefore, get a better deal from the builder.
New home construction prices are based on the builder's cost plus their profit or markup. In most cases, homebuilders either have a marketing budget, which includes commissions, or they use a percentage profit or markup which includes commission. What happens when a homebuyer works directly with a builder is that the builder pockets the unpaid commission as additional profit.
You also may not know that the builder is not required to have a licensed agent working for them. When you hire a CBAR real estate professional, you will be hiring a licensed agent who represents YOU, not the builder! Your Realtor looks out for YOUR best interests. The Builders agent or rep looks out for the BUILDERS best interests. Sometimes those best interests are the same for all but many times they are not.
Myth #2: You don't need a realtor since you will be working directly with the builder. The builder will take care of the financing, the title company, and all of the administrative paperwork associated with the purchase of a new home. Builders sometimes make it seem that buying your new construction home is easier without a Realtor involved. They may even tell you that having one is not necessary. This might be true if the builder represented your interests instead of theirs.
Myth #3: Realtors know little or nothing about construction, so why would you need one? A Realtor would just be in the way. The best arrangement is for you, the buyer, to have a qualified Realtor or team of Realtors represent you in the transaction.
Having a qualified realtor to represent your interests when having a new home built is essential. A real estate agent will keep a detailed account of the builder's actions and make sure that you are getting the most home for the money. The best part is that there is no additional cost to you!
“TO DO” LIST FOR BUYING NEW CONSTRUCTION
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CUSTOM OR PRODUCTION—WHICH BUILDER IS RIGHT FOR YOU? Residential builders are divided into two categories, production builders, and custom builders. The difference is the amount of customization you can do to the home. Many buyers assume that a production home is less expensive. However, you can build in a wide range of price points for each. A production builder builds multiple homes at the same time using plans already drawn. Custom builders usually build a one-of-a-kind home design created by an architect and the buyer.
Custom homes are not automatically more expensive than a production home. However, production builders have the advantage of being able to purchase building materials in bulk and have a full-time team to keep up a steady building pace.
When you’re considering whether to work with a production builder or a custom builder for your new home, think about:
• How much input you want to have in the design of your home • Where you want to live
You will more than likely hear of a semi-custom home builder as well. All will vary in how much you can customize on your home. Some will let you modify everything, including moving walls while others who only offer options for floors, appliances, counters, cabinets, and lighting.
ON THE ROAD TO A DECISION If you are leaning towards a production builder rather than hiring an architect, you have several choices. Production builders offer new homes to meet most every desired timetable. Besides houses that you can start from scratch, they may have partially completed home and fully completed spec homes.
• Production Plans – Buildable plans are floor plans offered by the builder on a lot of your choosing. Some builders offer a dozen or more home designs per community while others, only one or two. The level of floor plan customization varies among production builders. Building a floor plan on an empty lot can take four to six months or longer. Most builders will start construction thirty to forty-five days after you sign a contract depending on how long it takes to obtain the necessary permits and inspections of the site.
• Spec Homes – Some builders keep one or two completed homes available for buyers with a tight timeline. Typically these houses are the most popular floor plans and options.
• Quick Move-Ins – Some builders partially build homes to enable buyers the ability to do some personalization. Sometimes a quick move-in home is available because a sale falls through and the builder has to put the home back on the market.
• Model Homes – Most builders upgrade their model homes to showcase optional features. These homes have been professionally designed and decorated and often include extra landscaping. Builders typically wait to sell the model home until a community is sold out or nearly complete, but sometimes they’ll sell it to a buyer who’s willing to lease it back to the builder and wait to move until the builder is finished showing the model.
Budgeting for Options – When you buy an existing home, you’re paying to buy the home as is with a set
Note: Buyers need to have their monthly payment
price. When you buy new construction, your purchase
decided before choosing options. If too many options
price includes both the base price and any options
are added and the home does not appraise for the full amount, the buyer will have to make up the difference
you choose. For most buyers, the primary driver is
out of their own pocket.
their personal needs and taste, but it’s also wise to consider which upgrades retain the most value when you sell your home someday. Your CBAR real estate agent can help you determine which will give you the best return on your investment.
HAVE YOU DECIDED TO USE A BUILDER? Then it’s time to narrow your choices down based on your Realtor’s recommendations. Next, you need to see their work in person. Of course, every building claims to have a quality product. However, you need to see it in person to inspect it to see if their work is up to your standards.
Most builders will have homes under construction or a model home. Don’t look at just one if possible. They should show you one or more houses that represent their standards to hold them accountable for building a home for you with the same quality.
When visiting the model home, be sure to ask how much the house is as shown. Keep in mind that the model home usually has lots of upgrades. You will want to know the difference between the base price and the model. Also, get a complete list of everything that is included in the home. What types of materials and construction processes are also important.
For added peace of mind, we recommend bringing your Realtor to be sure you have all of the information you need.
CHOOSE THE RIGHT BUILDER You have likely narrowed down your choice of builders based on your model home visits, budget, and priorities regarding a neighborhood or a particular home style. Before you select the final builder, you should do a little more research to learn about the builder’s reputation and quality, if you haven’t already.
Realtors can help you recognize the level of quality in different homes and can share their expertise and knowledge about local builders. Realtors who sell new homes discuss the builders and their client’s experience among themselves so they can be an excellent source of information.
Something else you should be aware of is the included features to see what materials are being used for countertops, cabinets, and flooring. Check to see if the roof has a 30-year warranty and look at the exterior materials used. Try to visit homes in various stages of construction to see what they are like without the options usually in a model home.
NOW THAT YOU HAVE PICKED A BUILDER We hope the first thing you did was hire a real estate professional to work with you and your builder. If you visit the builder without your Realtor present, be sure to let them know you have a Realtor representing you.
Be Prepared - Many builders will ask you to pay cash in advance for upgrades. They don’t want to be responsible for them if you decided not to proceed with the home for any reason. You should also expect that if you do walk away from the sale, you may not receive a refund of your deposit or additional fees paid towards upgrades.
Consider Resale – While it does seem strange to think about selling your home before it's built, your home is an investment. You want to be sure you will see a return. If there are existing homes in the community, a Realtor can pull reports to see what older homes have closed at in the community and guide you into some of the best new home upgrades with the highest return on investment. Some improvements make a difference, while others are throwing money away.
Do Not Sign A Contract Until You Have Ironed Out All of the Details – Your builder’s sales representative may take advantage of your emotions. Once you’ve become attached to a brand new home, they might ask you to write the contract quickly, so you don’t lose those feelings. However, it is vital to know what is in the agreement. Your Realtor can be a huge help when going through the builder’s contract.
NOW THAT YOU HAVE PICKED A BUILDER CONTINUED… Design Your Plan for the Future – Most homeowners are building their “forever” home. Be sure to design with reduced mobility in mind if you are planning on living in the house during your senior years. Potential problem areas include elevated porches and second-floor master bedrooms.
Understand Your Floor Plan – Most floor plans include room sizes. If you can’t visualize the room sizes, take a measuring tape and compare the room sizes to those in your current home. Many builders offer virtual reality tours to show you what will be built, but a better option is to visit a home with the floor plan you want, even if it's still under construction or in a different community.
Get a Copy of the Blueprints, Floor Plans, And Surveys – This will help you in the future if you want to make changes or sell. They are easy to get in the beginning, and it’s imperative to have them.
DETERMINE A COMFORTABLE MONTHLY INVESTMENT While you’ll need a loan preapproval from a lender when it’s time to shop for a home, you should develop your budget of what you can spend on a house. There is nothing worse than falling in love with a home and finding out it isn’t in the budget. Imagine the opposite, you settle for a home because you think that’s all you can afford and you find out differently later.
So, what steps should you take to determine how much you can spend on buying a new home? Contact mortgage companies to see what you will qualify for. They will check your credit report and advise you on how to receive the best loan and interest rates.
A lender will also look at your debt-to-income ratio. This is a formula that compares your gross monthly income to your entire housing payment (principal, interest, taxes, insurance, and any HOA fee). It also takes into consideration the minimum monthly amount on all other debt, such as your car payment, student loans, and credit card debt. The maximum debt-toincome ratio lenders will allow is 43 percent. The most important number is going to be your desired monthly payment amount. The lender can then calculate the total amount you can borrow to meet that range.
MORTGAGE LOAN QUALIFICATIONS To determine if you are eligible for a mortgage, the lender will review your credit history, job history, income and assets. They will look at these for either a production builder or an existing home. When you’re shopping for a home, regardless of whether you’re looking for a new home or a resale, it’s best to consult a lender and get prequalified or even preapproved for a loan. A prequalification for a mortgage is based on your verbal statements about your income, assets, debts and credit score, although many lenders will also do a quick credit check as well.
Many factors go into a loan approval, such as your job history and your cash reserves, which is why it’s so important to talk directly to a lender as early as possible in the home shopping process about your circumstances.
Even if you have a foreclosure or bankruptcy in your past, you may still qualify for a new mortgage depending on how long ago it happened and why. Lenders are well aware of the difficulties many families experienced during the recession.
If you can document that you had good credit before a job loss or reduction in hours and your credit has since recovered, you’re in a better position than someone who has consistently mismanaged money with an overload of credit card debt. A lender can work with you to reestablish your credit or give you advice so that you’ll be able to qualify for a mortgage as soon as possible.
PRICING AND NEGOTIATIONS When you buy an existing home, it’s common to make an offer to the homeowners, receive a counteroffer, and then negotiate on the price and terms and conditions of the transaction before agreeing. Buying a newly built home is much simpler than that. While this doesn’t mean that negotiations never take place, the process is more straightforward when you’re buying a new property.
In a healthy housing market, some builders may stop selling homes for a few weeks or months and keep customers on a waiting list until more homes can be built. In a slower market, you may find the same builders offering more incentives to keep their inventory moving. Builders also need to be cognizant of protecting the investments of their initial buyers as well as keeping appraisals in mind as they price their homes. This is why builders are far more likely to negotiate with potential buyers on options and closing costs rather than reducing the base price.
Note About the Design Center – If you are building a home from the ground up or you are buying one that is almost completed with the ability to choose some of your colors and finishes, be prepared to spend additional money in the design center. There are usually upgraded cabinets, lighting, countertops, flooring, etc. that you may want to add to your home. It is best if you have an idea of your budget before your appointment along with a list of your priorities.
WHICH OPTIONS ADD THE MOST VALUE TO YOUR HOME? While you may plan to stay in your newly built home “forever,” the reality is that eventually, you may want to sell it. Discuss potential resale value with your CBAR real estate agent throughout the process of buying your new home, from looking at future development plans in or near your chosen neighborhood to deciding on a floor plan and lot. Resale value should also be part of the equation when it comes to determining how to spend your options budget.
According to research from the National Home Builders Association, the most coveted options and space are as follows:
93% of Home Buyers Want a Laundry Room 90% Want a Linen Closet In The Bathroom 86% Percent Want Garage Storage 85% Want a Walk-In Kitchen Pantry
APPRAISAL ISSUES When making your design choices, you should maintain an awareness of future resale value. If you want something unusual, go for it but realize that years from now, it could make your home a bit harder to sell. There’s also the issue of overbuying on options, particularly if you’re financing your home and need an appraisal to match the amount you need to borrow. If your appraisal comes in too low, you may be required to pay that out of pocket. It is critical to keep your real estate agent in the loop when considering upgrades.
HOW MUCH CASH WILL YOU NEED? You’re on the cusp of closing the deal and owning your very own home. It is important to pay attention to all of the minor details that need to be handled to make the purchase official. Thankfully, your real estate agent can help you with these tasks, like facilitating paperwork between your mortgage lender and signing the necessary forms. Of all times during the home search process, this is the one when it’s vital to double-check every document and agreement to make sure you and the seller are on the same page. Many deals fall through at the last minute due to miscommunication, so work with your agent diligently to get the deal past the finish line in a timely and efficient manner.
YOUR HOME’S STARRING ROLES Builder – The size of your builder’s staff depends on
Construction Manager – The person could have one of
the size of the building company. Many smaller or
several titles such as site supervisor, site superintendent,
regional builders are family-owned businesses with
project manager or even just “builder.” This person
several generations involved. Larger builders may
won’t necessarily do hands-on construction of your
have both national and regional offices in addition
home but will be responsible for overseeing the entire
to their local developments and design centers.
project from permitting to inspections and construction.
Sales Consultant or Associate – Employed by the
Contractors – Your builder will either hire outside
builder to be knowledgeable in home designs,
contractors or rely on staff contractors to build your
locations, and construction. Your real estate agent
home. You may not meet any of them, but if you’ve
will help you address any concerns with them.
chosen a reliable builder, you can be confident that your builder has hired the best available contractors.
Design Center Consultant – All are trained to help buyers make multiple decisions on how their
Inspectors – Your home will be inspected multiple times
finished home will function and look. They also pay
while it’s under construction by your builder’s inspectors
attention to your budget when selecting finishes
and county or city inspectors. You may also hire an
for your home.
independent inspector before closing.
BUILDING MILESTONES No matter how big or small your home is or how many options and upgrades there are, the building process is the same. Here is a brief description of the process: Permits – Before any construction can begin, the city or county government has to approve the design and issue permits for everything from the zoning and grading to the septic systems, home construction, electrical and plumbing. Some builders can speed the permit process up by limiting exterior changes. During this time the builder is ordering materials and scheduling contractors. Site preparation – Before the home can be built the site needs to be cleared of trees, rocks, and debris and the ground leveled. Plumbing Rough-Ins – Forms are placed, and plumbing drains and pipes are installed. Foundation Poured – On the Mississippi Gulf Coast, most homes are built on a slab or with a chain wall. There is a curing period for this to set up and no work will be done during this time. Framing – The shell of your home goes up next, including the walls and the roof. Plywood or oriented strand board (OSB), which is engineered wood particle board, is used for the exterior walls and roof. Windows and doors are installed at this time too. Then a house wrap will be introduced to prevent water from seeping into your home while allowing water vapor to escape. Roofing Installed – After the framing is complete, your roof is installed. On the coast, the preferred roofing materials include metal or shingles. Plumbing, Electrical, And HVAC Installed Contractors will begin installing ductwork for your heating, ventilation, and air conditioning (HVAC) system, while the plumbers and electricians start putting pipes and wires into your interior walls. Large plumbing items such as your tub and shower will be installed before the interior walls are completed to make them easier to move. Once the roof is done, the electrician will start putting in receptacles and outlets and running wires to the breaker panel. Insulation Installed – Homes typically have insulation installed in all exterior walls, the attic, and floors that are located above a basement or a crawl space. Insulation is given an “R-value” to indicate how well it protects the inside of your home from heat and cold. Your builder is likely to use blanket insulation as well as loose-fill and blown-in insulation to provide a high level of comfort and energy efficiency in your new home.
Install Drywall and Exterior Finishes – After the electricians and plumbers have done their work behind your walls, drywall can be installed, taped, and covered with a primer coat of paint. Brick, stone, stucco, or siding (vinyl, metal or cement) will be installed on the exterior. Interior Trim And Exterior Walkways Completed – The next step is to install trim throughout your home, including baseboards, moldings, window sills, doors, door casings, and stair railings. Your cabinets, vanities, fireplace mantel, and any decorative trim will also be installed at this time, and your walls will be painted. Outside, your driveway is formed, (unless the builder chose to do this at an earlier point) along with your walkways and patio. Floors, Countertops, And Exterior Work Nearly Complete – Your hardwood, laminate and tile flooring go in next as well as your bathroom and kitchen countertops and other tile work. If you’re having carpet installed, that will be done later. Outside, your yard will be prepared for proper drainage and future landscaping. Mechanical work completed; fixtures installed. Your light fixtures, outlets, switch plates, and HVAC are installed, along with your sinks, faucets, and toilets. Final Touches – The last step is installing carpet and shower doors if applicable. This is then followed by a thorough clean-up of any construction debris. Your exterior landscape, including any grass or trees, will be prepped and planted. Building Timeline – A production home typically takes from five to seven months to complete, while a custom home can take up to a year or more, not counting the design and permitting phase. The length of time it takes depends on multiple factors including the size and complexity, availability of labor and materials, site preparation and the weather. Your builder can give you a good sense of the progress being made on your home while it’s under construction. If you are as eager as most buyers are to move into your new home, you can help keep your builder on track by avoiding change orders. Your builder asked you to make your choices for structural options at the time you signed the contract or shortly after that. If you decide
BUILDING MILESTONES when your home is half-built that you want to redesign the layout or change your selections, you may not necessarily be able to make that change. Even if you can, no question making changes will slow the building process while the builder obtains new permits and brings back the plumber and electrician and other contractors. Not only can change orders delay construction, but they also can add to the cost of your home. Inspections and Visits – Several inspections of your home will be conducted at various stages of construction by city or county inspectors. These are usually done without the buyer being present. • Inspection 1: After the foundation has been poured and cured, an inspection must be done to make sure the work meets the local code of building standards before additional work can be done. • Inspection 2: Once your framing is in place, another inspection must be done before your drywall goes up to make sure that everything inside your walls has been built according to the permits and code. Inspections 3 and 4: In some cities/counties, inspections are done simultaneously on your plumbing, electrical, and mechanical systems. • Inspection 5: Before you are allowed to move into your home, your builder must obtain a Certificate of Occupancy based on a final inspection by your city or county governing authority. Many builders also schedule a walk-through for buyers early in the construction process as well as a final walk for buyers just before closing. A particularly important walk-through is done once your framing is up but before the drywall install. Buyers will do a walk-through with the project manager to go over the options again and to check out the wiring to make sure it’s what the buyers requested. You should expect to spend an hour or two at this pre-drywall inspection. Your CBAR Realtor should also attend the inspection to catch anything that you or the project manager may have missed. Schedule a Third-Party Inspection – You may be wondering whether you should hire a third-party home inspector. Clearly, you don’t need information about the age and condition of your appliances or systems as they are brand new. Depending on your location and the size of your
home, a home inspection will cost $250 to $400. If you choose to hire an outside inspector, it’s best to schedule that inspection within a few days before your closing so that your home is complete or nearly complete and your builder has time to make any required repairs. There’s no need for a daily check-in on progress, but you should periodically email or call your sales consultant or project manager to find out the status of the project. There are several reasons to stay in touch with your builder, including the need to know when to lock in your mortgage rate. Your builder should alert you if there are any delays caused by the weather or materials. You’ll need to have a firm idea of when your home will be complete to arrange for a moving company and to begin packing. Maintain Or Improve Your Credit – In addition to communicating with your builder and real estate agent, it’s essential that you stay in touch with your lender. Even though you’ve been preapproved for your financing, your lender will need to do a final credit check and re-verify your employment just before you go to settlement on your new home. Don’t take on new debt and consult with your lender before making any big decisions or financial changes. If you change jobs, talk to your lender about your situation and make sure that you’ll have at least two paystubs in hand before the closing on your new home. Don’t get a new car or even apply for additional credit before your house is built because this could lower your credit score or increase your debt-to-income ratio beyond the maximum allowable amount. Be careful to pay your bills on time, of course. What To Expect During Your Final Walk-Through – Your final walk-through and home orientation are one of the most exciting days of your new home journey. Many builders deliberately schedule this a few days before your closing to have time to fix any minor details. The majority of builders want your home to be as close to perfect as possible before you take ownership. Getting Ready to Move – If you’ve been in close communication with your builder, you should have an approximate closing date. Glitches can still occur, even at the end of the building phase. While you’re waiting, most likely bursting from excitement, you should be preparing for your move.
BUILDING MILESTONES Line Up a Mover – Even if you don’t have an exact date for your move, you can start the process of choosing a professional mover, unless you decide to convince friends and family to help instead. Get recommendations from your real estate agent, friends, and the sales consultant in your new community. You should check each mover’s references and make sure the moving company is licensed. Once your builder tells you when the Certificate of Occupancy should be ready, you can lock in a date with the mover. Movers typically offer to sell you boxes and supplies like bubble wrap and packing tape, but you can usually find these items more cheaply by asking for free boxes at local retailers and picking up packing materials at a discount store. If you prefer, you can pay your moving company to do the packing for you. You can sell items online on sites like eBay or organize a yard sale. Start Packing – You can start packing as early as you want. In fact, the earlier you start, the better off you’ll be. The smartest way to get started is to do a complete inventory of your home. Not only will this help you decide what to keep and what to buy new, but you’ll also have the information for the movers and homeowner’s insurance. There are several ways to take inventory, including just making a list with pen and paper. You may want to consider taking photos or videotaping your belongings for insurance purposes, or you can use one of the many apps available for inventory, such as MyStuff2, Home Inventory, or Delicious Library. Your insurance company may have an app, too. First, tackle are the things that are already packed away: your storage boxes. Go through any boxes you have in a garage, basement, attic, or paid storage unit and see which items you still want or need. Next, pack up your closets. Your mover will bring you wardrobes for your clothes and will likely take your dressers as they are. Moving is the perfect time to sort through everyone’s clothes and donate or sell items that are not being used. Designate one box to hold the items you’ll need on the first day such as towels, toilet paper, paper towels, paper plates and plastic utensils, sheets for each bed, soap, and any other miscellaneous items that you may need as you make the transition from one home to another. Save room for your smartphone chargers and medicines that you take regularly.
You may want to keep a few basic pots and pans, mugs, silverware, and dishes out for a few weeks along with your coffeemaker. During the final few days, you may find it easier to use paper plates so you can pack your dishes. As your move approaches, it is vitally important to keep all the documents related to your home purchase and your financing easily accessible, along with all of the receipts and paperwork related to your move. Update Your Address Everywhere – To ensure your mail gets delivered to your new home, you can visit your nearest post office location for a change of address form or go online at USPS.com to update it. Change Address At: • Department of Motor Vehicle • Credit Card Companies • Student or Personal Loans • Your Bank • Voter Registration Board • Insurance Company • Utilities • Schools • Doctors • Dentist • Veterinarian If you’re moving far away, get copies of your medical records, dental records, and, if you have pets, vet records. You may want to look up health care providers that take your insurance and see if they are accepting new patients or have a long wait time to get an initial appointment. Depending on the distance of your move and where you do your banking, you may also want to open a new account at a financial institution with a branch in your new community. Now that your settlement date is approaching, it’s time to contact the insurance company you chose to make sure your coverage is in place on the closing day. You will need proof of coverage at closing. When your builder tells you that your home is almost complete, contact your lender so that the final loan papers can be drawn up. If you’re working with your builder’s preferred lender, the builder will likely be in touch with them to schedule your settlement.
BUILDING MILESTONES What to Expect on Closing Day – Your lender, your builder, and your CBAR real estate agent should be present. At your settlement, you and every buyer whose name is on the title will need to bring photo identification. You must provide your proof of homeowners insurance or have arranged to have this delivered to the title company ahead of time. Also, you’ll need to have either arranged for a wire transfer or bring certified funds for your down payment.
Organize Your New Life – While you’re settling in, take the time to find your way in your new community. Start putting together essential information such as emergency phone numbers for the police, fire station, and utility companies, plus the address of the nearest hospital. You may want to locate the closest grocery store and create a list for your initial shopping trip before you move since you’ll have so much to do during those first few days in your new home. Whether you move into a community with a retail center or a condominium in an urban area with a variety of shops and restaurants at your doorstep, you may want to gather information about local delivery restaurants and nearby options for dining.
Organizing Your New Home – Finding a place for your paperwork and your new house keys should be easy in your new home since many newly built homes have been carefully designed with built-in storage, and thoughtfully located places to charge your smartphone, tablet, and laptop.
UNDERSTANDING ENERGY-EFFICIENT FEATURES New homes built in the United States today are more energy-efficient than the homes of the past. We can attribute this to the new products and building techniques that are now available. At the same time, new homes must be built to meet the latest standards established by the government as well as buyer demand for energy-efficient features. Nearly all residential builders have a package of energy-efficient features that are standard in every home. You may also be able to add features such as a tankless water heater, or a more efficient heating and air conditioning system.
HOMEOWNER'S ASSOCIATION Homes in a community with a Home Owner’s Association (HOA) must meet guidelines set by the association. Failure to comply can incur a fine, so you’re less likely to see overgrown yards, peeling paint or harsh exterior paint colors. HOAs offer excellent protection for your investment in a new home and keep the community looking good. Common areas are also typically maintained by the association. When you’re buying a new home that’s part of an HOA, it’s essential to read the regulations for homeowners to make sure there aren’t any rules you have difficulty complying with. For example, some HOAs require homeowners to gain approval for changes to the outside of their property from a review board; others ban home-based businesses, and some prohibit trucks or boats to be parked overnight in the community. The rules offer the benefit of maintaining home values and the community’s appearance but can sometimes be frustrating to homeowners, as well. Have a question on your HOA? Get Involved! HOA regulations are determined by a committee of homeowners in the neighborhood or a board of directors composed of residents. Decisions are implemented by a management company or a group of community volunteers. Want to have a voice in the decisions? You can get involved with the HOA by attending meetings, speaking up, volunteering or running for the board. It’s also a great way to get to know your new neighbors and to help set the standards for your community.
NEW CONSTRUCTION DICTIONARY Adjustable-rate mortgage (ARM): A mortgage loan
Certificate of Occupancy: Also referred to as a
with an interest rate that periodically changes in
“CO,” this document is issued after the local
response to the market or Treasury bill rates.
jurisdiction has made all inspections. Without the CO
no one can move into a new home.
Allowance: A sum of money set aside in the contract for items that have not been selected and named in
Change order: A written document that modifies the
the agreement, such as a sum of money for electrical
original plans for the home’s features, floor plan, or
fixtures or subflooring.
finishes. Change orders can add to the price of the house and the length of time it takes to build it.
Amortize: Paying off the mortgage debt through regular installment payments of both principal and
Closing: Also called the “settlement,” when all
interest over a set period, making equal or nearly
papers are signed and the ownership of the property
equal payments until the loan is paid.
transfers from one owner to the next.
Annual percentage rate (APR): The yearly interest
Commission: The fee paid to the buyer’s agent from
rate paid on loan. Federal law requires exposure of
the proceeds of the sale of the home.
this as part of the truth-in-lending documents. Comparable sales (comps): Sales prices of similar Appraisal: An estimate of the value of the property
properties used to estimate the market value of the
by a professional appraiser.
property by appraisers.
Blueprint: The drawings of the floor plan that are
Conditions, covenants, and restrictions (CC and R’s):
used for designing and building the home, getting a
The standards that define how a property may be
price estimate and for requesting permits.
used and the protection made by the developer or a homeowners’ association that must be followed by
Build on your lot: A new home built on land already
all residents in the master-planned community.
owned or newly purchased by the buyers.
Conforming loan: A mortgage for an amount that is
Builder warranty: Many builders offer a one-year
lower than the limits established for loans eligible
guarantee on materials and a ten-year warranty on
for purchase on the secondary loan market by
structural issues. New homebuyers will also have
Fannie Mae or Freddie Mac.
warranties provided by manufacturers such as a 20or 30-year roof warranty or appliance warranties.
Construction loan: A mortgage used to buy land and build a custom home.
Builder’s risk insurance: Insurance coverage that protects the builder during construction. Extended
Contingency: A part of the contract which states
coverage may be added to the contract for the
that the deal will be null and void and the deposit
returned if the said conditions are not met; for example, many contracts for existing homes are
Building codes: Rules established by a local or state
contingent on a satisfactory home inspection and
jurisdiction that cover how a house can be built or
the buyer obtaining financing based on the
modified. Newly constructed homes must meet the
appraisal. Most contracts for newly built homes are
most recent codes, but existing homes are not
required to be brought up-to-date before they are sold.
Contractor: A licensed company that provides building services. A newly built home will often have
Building insurance: Insurance that covers the building
a general contractor to supervise the project along
itself during construction.
with specialty and subcontractors who handle specific elements of the home-building process,
Buy-down mortgage: A mortgage loan for which the
such as electrical work.
buyers, the sellers, a third party, or even the lender pays an initial lump sum to lower the interest rate for a set period (usually one to five years) to reduce the initial monthly payments.
NEW CONSTRUCTION DICTIONARY Conventional mortgage: A mortgage offered by a
Fannie Mae: A Government-sponsored organization
lender that is likely to be purchased on the secondary
that buys mortgages from lenders to make loans
loan market by Fannie Mae or Freddie Mac. The U.S.
more available and affordable.
Congress establishes limits for these loans annually. Federal Housing Administration (FHA): Government Credit score: A number assigned by each of the
agency that provides lenders insurance on low down
three credit reporting agencies that reflects the
payment loans, so borrowers have easier access to
credit history of the consumer and changes
according to the current financial situation of the consumer; also known as a “FICO” score, a
Fixed-rate mortgage: A mortgage loan in which the
trademark of the Fair Isaac Corporation.
interest rate remains the same for the entire length of the loan. Fixed-rate loans are available for 30,
Custom: A home built entirely to the buyers’
20, 15, or 10 years, though some lenders will offer
specifications rather than according to a builder’s
loans with special terms to meet borrower needs.
floor plan. Foreclosure: The legal process that occurs when the Deed: The legal document that is used to convey
borrowers have become delinquent on their loan
ownership to the titleholders.
and the lender repossesses the property and sells it. The proceeds of the sale are then applied to the
Deposit: A sum of money due when the purchase
contract is signed for a newly built home. The amount of the deposit varies from one builder to
Freddie Mac: A Government-sponsored organization
another and can range from a few hundred dollars to
that buys mortgages from lenders to make loans
thousands of dollars depending on the home price
more available and affordable.
and whether the buyer is working with a production or a custom builder.
Good faith estimate: An estimate of the entire cost of buying a home, including the down payment,
Down payment: A cash portion of the amount for a
interest payments, and closing costs associated with
property which is due at the settlement; many
a loan; to be provided by the lender within three
conventional loans require a down payment of 5
days of a loan application. The estimate is divided
percent, 10 percent, or 20 percent, while FHA loans
into sections according to which fees can change at
require 3.5 percent; some VA loans are available
the settlement table and which cannot.
with zero down payment. Hazard insurance: Insurance that protects Draw: The amount of money available to a
homeowners and lenders against financial loss from
contractor at different established periods of the
fire or other damages (see homeowners insurance).
building process. Custom home builders typically
arrange access to a draw on the construction loan
Home warranty program: A program that provides
taken out by the buyer.
insurance for repairing appliances and systems in the home for a limited time; often paid for by sellers
Equity: The amount of the property owned after all
to give buyers extra protection during their first year
liabilities are subtracted from the market value of the
of ownership on existing homes.
property. Homeowners’ association: An association to which Escrow: An account held by the lender that includes
homeowners are required to belong if they own a
homeowner payments for taxes and homeowners’
home within the boundaries of the organization;
insurance until those bills are due.
members must pay dues and follow the rules of the association.
Extras: Work the buyer requests the contractor to do that is not in the contract but will be billed
Homeowners insurance: Insurance that protects
separately and can increase the price of the home.
homeowners and lenders against financial loss from fire or other damages (see hazard insurance).
NEW CONSTRUCTION DICTIONARY Implied Warranty: According to state regulations, all
Payment Schedule: A schedule agreed upon before
builders offer an implied warranty on their homes
the start of construction of a custom home, typically
regardless of whether they also provide a written
starting with a deposit and tied to the progress
warranty. The implied warranty means that builders are
being made on the house.
held responsible for repairing their work for a specified
period, such as ten years. Without written
Penalty Clause: A clause in a contract that provides
documentation, homeowners must obtain a legal
for a reduction in payment to a contractor or
resolution of a dispute if the builder doesn’t live up to
subcontractor if deadlines are missed or the project
the implied warranty.
isn’t completed according to specification.
Infill Lot: A small piece of land within an already
Performance Bond: Funds (typically 10 percent of the
developed community typically used to build just one
total price) that a contractor must deposit with a
home or a small group of houses; in some cases, an infill
government agency as an insurance policy to
lot is created by the demolition of an existing home or
guarantee the contractors’ proper and timely
other structure on the lot.
completion of a project.
Jumbo Loan: Any mortgage loan above the conforming
Permit: A required authorization from a government
loan limits set by the U.S. Congress for Fannie Mae and
authority to build a house or proceed with particular
Freddie Mac; these loans often carry a higher interest
phases of the building process.
rate and will require a higher down payment and higher credit score than smaller loans.
Plot Plan: A plan provided by a surveyor that shows the location of the home on the lot and also includes
Lien: A legal obligation attached to a property that
easements, property lines, required setbacks, and
uses that property as collateral for a debt. The lien must
be paid before a home can sell unless the buyer is willing to pay the lien to buy the house. An unpaid
Points: A fee charged by the lender equal to 1
subcontractor could ask a court to impose a lien on a
percent of the loan amount; points can be paid at
newly built home to receive payment.
closing to lower the interest rate on a loan.
Loan origination fee: A fee charged by the lender for
Preapproval: A qualification for a mortgage by a
administering and processing the loan; also sometimes
lender based on proof of the buyer’s income, assets,
called a “point,” equal to 1 percent of the loan amount.
and credit score. It states the maximum loan that the buyer can qualify for. The final loan approval
Loan-to-Value: The amount of the mortgage loan in
also requires an appraisal of the property to
comparison to the value of the home; the difference
demonstrate that the value of the property is more
between the two numbers represents the amount of
than the loan amount.
equity the owner has in the house or the amount of down payment a buyer is paying.
Prepayment Penalty: A payment required on some loans if the loan is paid in full before the end of the
Manufacturer’s Specifications: Written installation and
loan term by making extra payments, refinancing, or
maintenance instructions provided by a manufacturer
selling the property. Few loans today include this
of a product that may need to be followed to maintain
penalty, but borrowers should check to be sure this
the product warranty.
feature is not part of their loan.
Mortgagee: The lender who provides mortgage
Prequalification: An estimate of the amount of
money a person can borrow based on his or her stated income, assets, and creditworthiness without
Mortgage insurance: Insurance that protects the lender
against loss if the borrower defaults on the loan. FHA loans require both upfront and annual mortgage
Principal: The balance of a loan without interest.
insurance; conventional loans require private mortgage insurance for borrowers with less than 20 percent in home equity.
NEW CONSTRUCTION DICTIONARY Production builder: A builder who designs and builds
Settlement: The process during which buyers and a
multiple homes from a set of floor plans; buyers can
representative of the builder sign legally binding
modify these homes to varying degrees.
paperwork and loan documents that transfer the
ownership of the property; also known as a “closing.”
Property survey: A survey to determine the boundaries of a person’s land.
Settlement/closing fees: Fees charged by the settlement company for the processing of papers,
Punch list: A list created by the general contractor,
examination of the title, and review of loan documents.
project manager, or homebuyers of items that need to be fixed by the contractor, such as missing trim in one
Spec home: A “speculative” home that a builder builds
area or a section that needs another coat of paint.
without a purchase contract and hopes to sell at a
R-value: A number identifying the level of insulation. The
profit. Some spec homes are complete; others can still be personalized with the buyers’ choices for finishes
higher the number, the better the insulation works. The appropriate R-value for a new home varies according to
the climate and where insulation is being installed. Title: The document that proves ownership of property. Ratified contract: A contract that has been signed and accepted by both the buyers and the sellers and their
Title insurance: Insurance that protects the lender
against title defects, usually required by lenders. Homebuyers can also buy title insurance to protect
Real Estate Settlement Procedures Act (RESPA): A
themselves in case of a future problem with their title.
consumer-protection act administered by the U.S. Department of Housing and Urban Development (HUD)
Transfer tax: A tax, also known as a stamp tax, charged
that establishes rules for informing consumers about
by the state or county government when the property is
closing costs, settlement fees, and mortgage loans.
transferred. The tax is part of the closing costs paid at settlement.
Recording fees: Fees paid to the county or state for recording property ownership in land records.
Truth-in-lending: A statement required by the federal government to be presented to borrowers at the
Redline or redlined prints: A set of plans showing changes that need to be made on the original blueprint,
settlement that discloses an estimate of the annual cost of the mortgage and the total cost of the loan
typically identified with red pen or pencil.
over the loan’s full term.
Retention: Money withheld from a builder or contractor
Valuation: Another term for an appraisal of the
until completion of the project.
property value that is required by the buyers’ lender. Rural development loans: Low interest-rate loans with
The buyers pay the valuation fee.
100 percent financing that are administered by the U.S. Department of Agriculture (USDA)
Veterans Administration (VA): A federal government
(www.rurdev.usda.gov) and are restricted to properties
agency which, among other benefits, guarantees
in designated rural areas. Income limits may apply.
mortgage loans for veterans, members of the military, and their families with lower interest rates and a low or
Sales contract: A contract between a buyer and a seller
zero down payment.
that should explain what the purchase price includes, an estimated settlement and move-in date, what happens if the buyer cannot get financing when the sale is ready to close. It also explains what happens if the builder cannot meet the settlement date or any other contractual obligation, and what happens if the home appraises for
Walk-through (or walk-thru): A final inspection of the home by the buyers and their agent to check for any last-minute problems that must be addressed. This walk-through takes places shortly before settlement.
less than the agreed-upon price.
Written warranty: A policy provided by the builder for a Semi-custom: A home built by a production builder that
certain period (often two years on appliances and
buyers can extensively modify their preferences including
systems and ten years on the structure) that provides
making structural changes.
for the repair of any covered item at the expense of the policy rather than the homeowner.
go blue to find your way home BAY SAINT LOUIS 1188 Highway 90 Bay Saint Louis, MS 39520 228.467.0244
GULFPORT 9153 Lorraine Road Gulfport, MS 39503 228.295.0262
BILOXI 1966 Popps Ferry Rd. Biloxi, MS 39532 228.207.2308
OCEAN SPRINGS 2003 Bienville Boulevard Ocean Springs, MS 39564 228.875.1272
DIAMONDHEAD 4300 Gex Road Diamondhead, MS 39525 228.255.3550
PASCAGOULA 934 Jackson Avenue Pascagoula, MS 39567 228.769.7777
This edition of the CBAR Cares Publications goes into detail on all aspects of new home construction.