Life is filled with all sorts of decision, but there are few decisions that are as exciting and at the same time as frightening as making the decision to build a home. Buying a home is probably the single largest financial decision you will ever make in your life, and it is not a decision that should be taken lightly. If signing on the dotted line wasn’t hard enough, the process to simply get approved for a home in today’s economy is enough to make you want to pull your hair out (all of it!). However, if you choose the right home builder this process can become much less stressful. In this article, I am going to cover how to select a home builder and what to expect along the way as you deal with them:
Are All Homebuilders the Same?
No. While the term home building may seem pretty straight forward, there are many different types of home builders. There are home builders that build “tract homes” which are a series of homes that are built very similarly on a tract of land. Then you have semi-custom home builders who will offer you some control over the appearance and architecture of the home, and then you have custom home builders who give you usually total flexibility and control over how you want your home built. Typically, the custom builders tend to focus on more high-end home building. In either case, though, you want to identify whether you want customizable options or not.
Furthermore, and this is very important, you want to get a feel for the financial well-being of the company. It does happen where home builders begin to build your home, go out of business, and completely leave you hanging. While it may seem uncomfortable, the best thing for you to do is to simply ask them where they stand financially. After all, it’s your money and your home.
Understand Earnest Money
Earnest money is just a fancy term for a deposit. Typically, a builder will start to break ground on your new home even before your financing is full approved. To do this, though, they typically ask for a deposit called “earnest money.” Make sure you know how much this is up front because you will need to write them a check, and you want to make sure that you are in a position to pay this. I have found that this earnest money, like most things, comes with some “wiggle room.” What is also critically important to understand are the terms of the earnest money. What happens if your loan doesn’t get approved? Do you get your earnest money back? Usually you do not. I would recommend getting your financing all squared away prior to meeting with your new home builder.
Clearly Understand the Warranties and Your Allowance
A new home will come with warranties. Typically, a new home will come with a one-year “bumper to bumper” warranty, and trust me you will have issues with things like ground settling that will cause cracks. Make sure the company has a solid warranty team to handle problems quickly. Areas like your foundation and structure should come with a 10 or 20 year warranty. Just make sure that you clearly understand how long the warranty is and what it covers.
Allowances are an amount of money that is included in the sales prices for things like appliances, fixtures, upgrades, etc. This should also be clearly discussed.
Brandon Jones writes about new home builders like Dunhill Homes.