If you want to buy a new home and move in 12 months, what do you need to do now?
Delaware saw record realty transfer taxes in 2020, with Sussex County commercial and home sales leading the way in comparison to New Castle and Kent Counties. As a result of the ongoing construction boom, you’ll find it important to plan ahead if you want to buy a new home.
“I can just give the builder a deposit, they’ll build my new home, and when it’s complete, I’ll pay the balance, right?”
WRONG! No builder will begin to build your new home until you can demonstrate that you are approved for a mortgage or provide “proof of funds” showing you have the cash on hand now.
“I’ll have the balance due when I sell my current home!”
That doesn’t qualify as cash on hand; that is called a “Home Sale Contingency”, and no builder will accept a home sale contingency on the purchase of a to-be-built home in this market. Even if a builder agrees with a home sale contingency, they will not start to build your home until you remove the contingency.
“Is there another option?”
If you own your current home outright or have significant equity, you could take out a HELOC (Home Equity Line of Credit) and use that to purchase your new home. Then, when your current home sells, you repay the HELOC. There may be some restrictions and rules that apply; check with your bank.
If you do intend to use this option, planning is even more critical. It’s advisable to apply for a HELOC early so it is available when you find a home you want to purchase. Whether you end up buying an existing home or new construction, you will be in a strong position and ready to proceed in a housing market plagued by limited inventory.
Here’s how it works when you buy new construction
There are many decisions to make if you want to buy a new construction home. Timing is critical, so let’s start at the very beginning:
|Do you need to sell your current home to buy your new home?||Can you pay cash or qualify for a mortgage to purchase your new home without selling?|
• If you need to sell first, you may need temporary housing while searching for a home or until your new home is built.
• Some builders always have Quick Delivery homes available. They offer limited or no options, but this could be the best solution if you like what you see.
• Settlement on Quick Delivery homes can be as quick as 30 – 60 days from contract.
• If you can pay cash or qualify for a mortgage without selling your current home, you can go to contract on either an existing home or a new construction home.
• You can personalize homes with builders that provide extensive selections. Once you go to contract, they schedule an appointment at their Design Center to finalize your upgrades and options.
• Settlement on these home purchases will be anywhere from 6 – 12 months or longer.
Remember, a to-be-built new home can take 3 – 12 months or longer to build depending on the builder, their offerings and their sales backlog. Delivery times are also being affected by COVID, which has caused shipping delays of building materials to the job sites. Some builders cannot deliver a new home until 2022!
We’re Here to Help
When we first meet with you, we’ll talk through all of these options. Then, we will work through each decision with you ensuring that you are ready and able to proceed when you find the right community, the right builder, and the home that will work for your future in Delaware.
Let’s connect and let one of our qualified agents help you find the best option for your new construction home.