Everyone knows buying a home comes with a vast array of decisions. One of the bigger choices is what home type is right for you. Do you place value on architectural features over energy efficiency? Are you looking for a home you can customize or are you an avid DIY-er? Choosing between purchasing an existing home, a newly built spec home or a new construction home comes down to several factors. Here are a few things to think about.
Pricing and Affordability
In December, the median existing home sales price was $232,000 versus the median new home sales price of $322,400. A 2014 Trulia study found that while 2 in 5 Americans would prefer a new home, less than half of those respondents would pay a 20% premium to purchase it. Purchasing a newer home, typically means paying a higher price, but factoring in the upfront costs of a new home can sometimes offset the future costs of maintenance and improvements in an existing home.
With existing homes, unless you’re able to settle on some contingencies in your purchase agreement, what you see is what you get, especially aesthetically.
If you purchase a spec home, a lot of the features current homebuyers want like walk-in closets, open floor plans and master suites are already included. Depending where a builder is in the construction process of a spec home, you may be able to have input on home design elements like tile and countertops.
If new construction is your path, you essentially choose between two types of home builders: production or custom. A production builder typically builds from a library of home designs while a custom builder creates one-of-a-kind homes to their clients’ likings. Production builders offer a range of “menu” items for clients to choose from like countertops, cabinetry, lighting, etc. With a custom builder, your customization involvement is extremely broad.
Home Maintenance and Improvements
Going back to Trulia’s study, 58 percent of respondents who preferred new homes to existing said spending less on maintenance and repairs was a big reason why.
If you calculate the cost of replacing furnace and air conditioning units, window replacement, a new roof, paint, electrical work, and so on, a new build can look much more attractive, especially if your prospective existing homes are in need of a lot of repair.
The thing about new construction is that land doesn’t pop up for sale in the middle of an area where you may want to live. When it comes to location, if a newly-built home is your end goal, you may have to accept a less-established neighborhood in a new development or a longer commute to work or other necessary amenities. When you commit to a newer home (specifically one in an up and coming development), you’ll likely be committing to a neighborhood in progress.
Sometimes, you just can’t beat the feel of an original Craftsman or Tudor style home. If you have a heavy preference on architectural features, an existing home or a custom new construction home may be your best option.
Not sure what your home style is? See some of the most popular home styles here.
Having a “green” home doesn’t necessarily mean having a home decked out in solar panels, but if low utility bills and a small environmenal footprint are important to you, you’ll need to examine the condition of every part of an existing home’s systems. From windows and doors and insulation to appliances and HVAC systems, you’ll need to determine how effectively a system is working, what might need to be replaced in the near future and how that compares price-wise to a new build.
Regardless of your home preference, we offer a range of mortgage programs that cater to the needs of every type of homebuyer. Whether you’re purchasing an existing home in need of major home improvements or buying land and building a custom home, we have the tools to guide you through. Download our free Mortgage 101 Handbook or Rehab and Construction Guide for everything you need to know about our loan options and financing process.