Realtors or mortgage professionals experienced working with home builders please explain the process? (Austin: lease)

[rmerrill1tx]

I've previously bought and sold two existing homes, but now after several years of renting (after a divorce) I'd like to build a new home in the next year to year and a half. I currently live in north austin and am thinking about one of the new home builder communities in Leader, Round Rock, or Pflugerville. I was putting off buying, but I read in a article that median home prices in Austin have increased 14% in the last year and with Yellen talking about the Fed raising rates over the next year, I get the feeling I should act relatively soon. I make a great salary but don't have a lot for a downpayment (spend it all on my daughter and private school). I can afford about $2400 - $2600 monthly mortgage payment inclusive not only of P&I but also taxes and insurance. I'd like to buy somewhere in the upper $200's to lower $300's with 5% or so down. Does this sound reasonable? My plan over the next year is to cut the extras and save for the down, but I have no clue how it works with a new build. What's a typicaly earnest money amount with a builder and when is it paid? Is it paid when I sign the contract for the build or later? How long does it take to build a house? Do I have time between contract signing and closing to save additional funds for the downpayment or is my down solely based on what I have at the time I sign the contract with the builder? Also, do buyers have to pay for upgrades as they go? I've read some yes and some no. When is the rate locked and how likely is it that the builder would pay closing costs? Finally, yes, I do plan on working with a buyers agent. I've read enough to know that's crucial, but any info y'all can provide before I start this process would be appreciated. The answers will inform when I get started.

Thanks!

[centralaustinite]

Why new?

Appreciation will be found in resale homes.

With a production builder, it is all pretty cut-and-dried, I'll wait for the realtors to chime in, to the best of my knowledge, unless you plan on doing a FHA, you will need more than 5% down.

I wouldn't worry too much about rates rising. Yellen didn't signal that at all.

[RoadWarrior12]

Earnest is due with the contract.

Upgrades are usually a 50% up front, 50% at close - but could be as high as 100% (although all can be financed into the loan, so effectively you pay all your closing costs up front).

You likely will not qualify if you do not have funds to cover the down, etc. in your bank well prior to close - they're not going to take "I'm saving up for it" in lieu of hard funds.

6 months or so is a reasonable estimate.

I'd echo the post above. Buy new unless you legitimately cannot find the home you want on the resale market. Property appreciates, houses depreciate.

[llkltk]

Sorry RoadWarrior, you don't need to put that much money down. If you have a realtor, you can negotiate a small earnest money check and no money down for upgrades.

[RoadWarrior12]

Originally Posted by llkltk

Sorry RoadWarrior, you don't need to put that much money down. If you have a realtor, you can negotiate a small earnest money check and no money down for upgrades.

Buying in DS in the 500K+ price point is going to be a far different experience from buying in the 2-300K price point in RR/CP/Leander. Builder incentives toward upgrades (what they use to offset deposit amounts) have been somewhere between slim and none for the past 16 months.

I don't recall specifying an amount of earnest money - although it is true that this amount will be relatively insignificant as a portion of the total spend. At the end, the question was when it was due. Due at contract.

Walking into that type of deal not expecting to come out of pocket for a good-size chunk will leave you open for disappointment.

[austin-steve]

Your first step is finding a local lender and getting pre-qualified, right now. You can get a conventional loan with 5% down. FHA with 3.5% down, but the fees are onerous in my opinion.

With a pre-approval letter in hand, you can start looking in earnest, but you may want the closing date to coincide with the end of your lease, else you can be subject to penalties for breaking the lease.

It sounds self-serving, but I honestly believe every buyer should be represented by a good buyer's agent unless that buyer is an expert in the process and knows everything. Few do. The trick is finding a good one instead of a dimwit. The number of idiot Realtors in our industry is shamefully embarrassing. Do your research and interview several who are familiar with your target area and who have closed enough deals to be experienced and competent in both resale and new homes.

With a good lender and Realtor, everything else will fall into place.

Good luck,

Steve