What to Expect When Buying and Building
The decision to buy a new or existing house excites and scares us all at the same time, because home matters. It makes a difference in our quality of life and is often people’s biggest lifetime asset and investment. Your home should be a valued personal space and sanctuary where memories are made, work gets completed, and relaxation happens.
From growing young families and first-time home buyers to seasoned house hunters and retiring seniors, every home buyer is looking for a place that fits their exact needs. Whether you’re looking at a new or existing structure or both, the process of buying a home presents a variety of challenges that can be mastered using knowledge and trusted partners.
20 Steps to Home Ownership
Potential owners of all experience levels can benefit from having the buying-a-home process explained periodically and refreshing their knowledge. Along with some core principles that do not change, many fluctuating variables affect home buying such as market supply and demand as well as domestic and global economics.
These 20 keys to the process will help you unlock home-buying success.
1. Check Your Credit
A credit score directly affects your buying power, so you’ll want to know what is in your file at the three major bureaus: Equifax, Experian and TransUnion. You can order one free report per year from each credit bureau, or you can find both paid and free sources to get each individual report or a cumulative number that incorporates data from all three bureaus. Improve or correct any information that would give you a higher score, which ultimately results in a lower interest rate.
2. Examine Your Budget
Start by looking at the net amount of money you make. Then, find one-third of your net amount to consider how much you can afford to pay a month for a mortgage payment. Many sources also say that you can determine how much your family can afford by calculating 36 percent of your gross income or 28 percent of your after-tax income. Make sure your calculations include the cost of your property taxes and homeowner’s insurance. Mortgage calculators can also be helpful tools when you’re examining your budget.
3. Discuss How Much to Spend
Each family’s budget is different but will include such expenses as utilities, home insurance, auto loans and insurance, education, cable TV, Internet, credit cards, eating out and many other things. It’s prudent to consider everything when trying to practically answer the question: “How much can we afford?”
4. Consider the Future
Most experts advise you to look ahead throughout the life of the mortgage to consider how possible changes planned or otherwise might affect your financial situation, such as jobs, income, health and family status.
5. Get Pre-Approved for a Loan
Apply to several sources to become pre-approved for a mortgage or home-building loan. This expedites your process and enables you to screen lenders. Some institutions may approve you for more than the figure you have in your head, but stick to what you know will be financially comfortable for the long term.
6. Study Mortgage and Loan Choices
Research mortgage types and pick one that is practical and right for your needs:
- Do you want to pay for 15 or 30 years?
- Do you want to do business with a credit union, bank, builder or general contractor?
- What interest rate will you pay?
- Can you roll insurance and taxes into the mortgage payment?
- How big of a down payment do you have?
7. Save a Down Payment
Private-mortgage insurance generally applies when an owner does not have at least 20 percent of the purchase price for a loan down payment. PMI is typically about 0.5 percent of the purchase price and will usually be applied until you have repaid 20 percent of the loan.
8. Prepare for Fees
There are also closing costs plus fees for inspection, appraisal, legal, title and other services that usually amount to an expense of about 5 percent of the mortgage payment.
9. Make a List of Priorities
Take some time to dream on paper. Make a list of the things that are important for you and your family to have in a house. Maybe teenagers need separate bedrooms and an adjoining bathroom. Perhaps a family plans to grow and needs an upstairs nursery. Other owners may want office or workshop space, a garage, storage, a dream porch, multiple bathrooms or other spaces.
10. Decide on Negotiable and Non-Negotiable Items
Once the priority list is made, go through as a family, couple or thoughtful individual, and decide which things are absolutely essential and which could be compromised on if other conditions are right.
11. Seek a Trustworthy Partner
Plan to interview people before you decide what company or individual to trust with your business and know each agent will have a different style. It will be important for you to feel comfortable with the person and their network of subcontractors, such as banking, title and legal firms.
The fee of a real estate agent or broker depends somewhat on the firm or person, but it is generally 5 percent or more of the sale price. You may need one or several professionals involved in property sales, such as a realtor, agent, broker, banker, builder, general contractor, attorney, title agent and/or land owner.
12. Begin Shopping
From neighborhoods nearby the kids’ school to cozy, rural getaways, a real estate partner can help you search the available market. You can also:
- Look online at the multiple-listing service (MLS) in your state
- Review what options new construction builders have available
- Attend open houses or tour model homes
- Drive around looking for lots and existing homes for sale
13. Search and Narrow Choices
Most potential homeowners want to find the perfect house right away, but it usually takes several viewings to find “the” one. When selecting a new home design, you’ll have to spend time reviewing and deciding on sites and designs.
14. Allow Enough Time
How long is the process of buying a house? That depends on how quickly you move through all the steps and find the structure you want to buy or build:
- For an existing home, anticipate a minimum of two months under ideal conditions and a maximum of 10-12 months if slowdowns occur such as credit repair or a lack of available property.
- Building a new home can take as few as four months and as many as 12 or 14, depending on the type of structure you choose, weather, the contractors’ schedules, and permitting and other processes.
15. Make an Offer
Once you decide on the property you want, you’re ready to spell out in writing the price you’re willing to pay and any terms attached to that payment. Sometimes the offer phase includes counteroffers and other negotiations through which the buyer and seller define points of sale. When an offer is accepted, the buyer usually produces money to show they’re serious about the purchase, and the down payment is held in trust by someone other than the seller.
16. Prepare for the Paperwork and Services
As the process moves forward, there will be an appraisal to determine the value of the property. There will also be the procurement of home insurance and title research to be sure neither the land nor home has liens or other legal issues that would impede a clear title transfer.
17. Conduct a Thorough Inspection
A home inspection brings in a professional to analyze the home’s interior and exterior. The inspector makes a report that gives the potential buyer valuable information about needed repairs and the condition of utilities, building materials and features.
18. Do a Final Walk Through
Insist on walking through the home or property to be sure it is what you expect and fulfills the agreement before you go to the closing.
19. Sign Papers and Get Keys
As soon as you’ve signed that pile of papers and presented a certified cashier’s check, you’ll get the keys to your property. If you buy an existing home, it’s wise to change the locks immediately.
20. Stick to Your Budget
Be wary of predatory lenders, unconventional loan practices, and anyone who encourages you to spend beyond your capacity. The American Bar Association and the federal government offer definitions of the broad term “predatory lending practices.”
Consider New Construction
Everyone dreams of having a house that’s customized to their needs, and people of nearly any means can build one. The buying-a-home process for new construction differs from existing homes in that you shop for a home from model structures and design concept illustrations.
Determining what you can afford is still essential, and then a builder can work with you to create the options you want within your budget. Building new involves a list of options, just like picking an existing home. There are sites within developments or that sit alone, or people may want to subdivide a family property for a home site. People may want to build a custom home, so they look for an empty lot or might consider razing a condemned or dilapidated property to create one.
Homeowners looking to build new have other considerations:
- Research where it is geographically practical to build a home. Your research might include survey work to establish property lines, a hydrology analysis to make sure the land doesn’t flood, a study of the area drainage, or analysis of the right-of-way needed to establish a driveway.
- Determine the permits, fees and installation expenses required to dig a well, install a septic or connect to city utilities. It’s prudent to research these expenses and then include them into your budget since some of them are substantial.
- Ask questions about neighborhood covenants that may prohibit certain activities, shore land or conservation districts that collect an additional tax, and the historical or environmental significance of the site. This tip applies to buying an existing home, too.
- Check the broader area and see what businesses are nearby and how you like the adjacent neighborhoods.
If you don’t already have a property in mind, new-home builders have robust information about available sites. It helps to think about where you want to be, such as urban or rural, and work your way through the choices from there.
Know New Construction Options
Owners building a new home can choose on-site, stick-built construction, for which a house is built in place on a permanent foundation, or off-site construction, for which a home is built in a factory, then transported and affixed to a permanent foundation. Material options for both styles commonly include wood, concrete and steel, with brick, stone and siding finishes and accents.
Off-site construction, or modular building, takes place within a climate-controlled environment and saves time over stick-built construction, which is subject to weather delays. Modular construction can also be customized such as on-site building and produced in options that range from basic to luxurious.
Many people like the environmental friendliness of off-site construction, because its tightly controlled processes produce less waste and about 80 percent less site activity than the stick-built process. Modular building happens from the inside out, so it features insulated and more energy-efficient wall outlets, air ducts, window seals and weld points.
Benefits of Modular Buying
The lower level of waste and lower cost for materials transport involved in off-site construction results in a cost savings of up to 15 percent or more, depending on where you live, the source you consult and the design choices you make. People also save time with off-site construction.
On-site construction has better resale value when that time comes, but most modular buildings come with a 10-year warranty. Some people still attach a stigma to off-site construction, but not usually those who know the industry well.
For example, the National Institute of Standards and Technology appointed a committee to study the construction industry and identify ways to improve efficiency and productivity. Among the committee’s main findings was this declaration of what could be done: “Greater use of prefabrication, preassembly, modularization and off-site fabrication techniques and processes.”
Realtor magazine dismisses stereotypes about modular architecture and says the latest generation is “strikingly contemporary and even glamorous.” Users of modular construction have said they appreciate the standardization and uniformity of the buildings.
Many other sources acknowledge the growing popularity of modular construction in home building and other big-player industries, such as:
- Health Care
- Food Service
- Emergency and security
- Multi- and single-family residential
- Science laboratories
- Power and energy
Buyers can get a home or building done just about any way they want. Regardless of what a person chooses to do, the same basic steps apply to the buying-a-house process and achieving the home you’ve always wanted.
Choose Green Diamond Builders
Green Diamond Builders offers full-service construction of residential and commercial buildings, with 25 years of experience in each and options for on- or off-site building. Steve and Mary Jackson have owned the business since 2004 and, through quality service and projects, have grown it to include two locations and more than 300 satisfied clients across several states.
Our family-owned company also builds exterior structures to use for storage, barns, garages, workshops, home-business space and other purposes. Our experience includes residential, commercial and recreational projects.
Green Diamond Builders offers on- and off-site construction and several styles of homes including one-level ranches, Cape Cod cottages, spacious two stories and waterfront spaces with several styles of each. Home sizes of standard design generally range from 1,400 to 3,300 square feet.
We hold licenses in Maryland and Delaware and have expertise in the soil and climate factors that affect building in that part of the country. Green Diamond Builders can show you lots of options in residential areas, as well and land-and-home packages or custom options for existing sites.
Our on-staff professionals range from builders, realtors and permitting experts to designers, demolition specialists and commercial construction gurus. We will provide guidance from the moment you decide to buy through the closing and beyond. It is our business and pleasure to help you in the process of buying a house and finding the keys that unlock your potential new home.
For more information or to contact Green Diamond Builders, call 302-284-1177 or visit us online to send an e-mail anytime or sign up for our industry newsletter.