Teach me about new construction homes

[compassion101]

Very green to new construction. We are planning to relocate to Florida (Tampa area) before next school year. Credit scores 720-730 and pre-approved for up to 575k. The one we are looking at was listed about 480k, but the guy we talked to said top options add another 10k and the lot is another 15-20k. Not sure if that meant it was that extra for a premium lot or was it for any lot. 

He mentioned something about signing something after we look at a model for the right of first refusal or first interest or something, then that would be followed up in December with a commitmet to buy and a bank approval and 10% deposit. 

Anyway, not sure how these thngs actually go so anyone with experience I'm happy to listen for all pointers. We do have a real estate agent down there and I will be asking him these things too, but would love to arm myself with as much knowledge as possible.

[CreditCuriosity]

Buidilng just south of Tampa currently actually.  I assume this is a builder home such as Lenner, Pulte or some big builder type of home?  Is the house under construction already or to be built?  In my case mine was a new construction meaning being built by a builder on said plan and on said lot with about 45k in upgrades.  Once signing the contract I think I put 5k down the day I was down their and had x amount of days to make it the full 5%, where-as for you for some reason is required 10%?  Sure I could of put more down, but 5% for conventional loan was needed in my case.  I then had so many days to get pre-approved for a loan I believe it was in the first 30 days after signing the contract.  I got approved by AUW(automated underwriting by their preferred lender the lender I used took me through all the way to conditional approval, due to not being able to be appraised on the time and a few things that are needed very late in the construction process.  You can't lock in an interest rate until 30-60 days out depending on the lender usually.  Since sounds like new construction by you and in Florida I speculate your house if singed the contract today would be about one year out approx give or take a few months due to supply chain and labor issues.  As I signed in early March of this year and suppose to be done in January of next year pushed back from October and so on..  I am in rough in electrical/hvac stage now and then up is insulation, drywall and finishing up interior and the likes.  Building a house pretty much anywhere in the country is VERY slow currently and certainly is in Tampa you will run across truss issue/lintel issue along with shortages of many othr things along the process as I have.  Hope this helps out my personal process in the Tampa area at least and maybe it answered your question?

[mike-fico]

Unfortunately, based on my research and experience, it depends.

When you are doing new construction consider that there is 2 parts of any home.  The LAND that the home is built on, and the Building you are going to have constructed.

Land can be owned by the developer, and you need to buy it from them.

Land can be owned by an individual, and you need to buy it from them.

Land can be owned by the builder, and you need to buy it from them.

The only thing in common is you have selected a builder, and they will build the house on some land.
Now depending on where the land is coming from, what you pay and how can be different.  

You may take out a loan to buy the land, and a separate construction loan to build the home, then take out a conventional mortgage at the end.
You may take out a loan to buy the land and a construction loan that converts into a conventional mortgage.
Or and or and or.

I'm currently having a home built in Dakota County, Minnesota.  We selected a custom home builder and a plan and are building the home on one of their lots.
We prequalified for 500k and 5% down.  When we signed the purchase agreement with the builder, we gave them the 5%.  We initially gave them $5000 to hold the lot we picked as we did some customizations on the home.  The builder is self-financing the construction costs of the home.  We will be getting a conventional mortgage once the home is complete that pays off the remainder of the agreed-upon price of the purchase agreement.  We signed that purchase agreement in February.  We should be closing in December.
For that same builder, other people have taken out construction loans and will need to get a conventional mortgage at the end.

With a construction loan, you borrow against the construction costs, but the loan is only paid out in stages.  And you as the borrower only pay interest on the amount actually paid out.  You don't pay the principal on the loan, which in the end gets rolled up into the final mortgage.

[compassion101]

Yes, if we go with this home it's Lennar. 

Thanks both for your input.

[Anonymous]

Currently in a similar situation. We are in the Tampa area. It seems that new construction is the best bet and best value. It's very competitive and the resales are going for too high too fast. 
I asked if we needed construction loans/only custom builders do that around here. Most let you reserve with Ernest money and then do 10% deposit and want a letter of commitment from the lender in 45 days. About 2

monyhs ago they were asking for 15% deposit and offers...but that's just one area.

I was told to budget 50-70k in upgrades. And there is usually a lot premium.
Good luck to you!! 

[compassion101]

So looking at alot of negative reviews on Lennar online https://www.consumeraffairs.com/homeowners/lennar-homes.html. Granted I think people generally only go here to complain and not to praise so trying to figure out how to weigh this into a decision. Are these the 60 complaints out of 100k homes built in recent years maybe? JR Horton, another big builder, rated similarly. I wonder is this just because they are large builders and a small percentage og homes are not built well, or if this is more commonplace.

Anyone have any experience/thoughts here?

[House2021]

I bought DR Horton this year the quality is absolutely terrible - as in the new construction apartment I lived at before this was far better quality than this house. I had my doubts too thinking you only get complainers online leaving reviews but I've moved in and my neighbors and I all have various and rather substantial complaints and the warranty service is awful. 

[compassion101]

Sorry to hear about that, House. Can you give some examples of what is wrong and what their response has been when you notified them?

[compassion101]

So we have decided to buy this new constrction house from Lennar. The process, as was explained to me, is that they will notify me once the lot becomes released, which is expected to be this week. Planned construction begins next week. We have already given them our upgrade slections (there were only a few upgrades available, most stuff comes standard without upgrades available.) We  have a pre-approval through their lender, as well as another lender. Once the lot is released we would have a date to go to contract a few weeks later and put down a deposit. They are expecting an April/May closing, which I am skeptical about but I think we will be fine if it closed anytime by August. 

I am considering hiring a lawyer to look over the contract etc. Confirmation that this is a good spend of money? Anyone know someone they recommend in the Tampa area? 

What else do I need to know?

[compassion101]

Happy ending! We closed on our new home as of 7-1-22 and moved in 7-6-22. It was a nerve-racking process all the way. We had opted to use a different mortgage company (Mutual of Omaha) and the loan officer was extremely helpful all the way through the process. But in the end we were sort of strong-armed to move over to the builder's lender (long story, but basically closing scheduled for 6-30 couldn't happen due to unfinished stone vernier--we could close with them 7-1 or needed to wait till 7-15 to close with MoO) , but at the end of the day they beat the rate by a significant amount so I was okay with it and apologized to the original loan officer. 

Love the home, 5br/5ba 3400 sq ft. A few issues but overall Lennar has been real good about getting things done that were on the exception list.