So, will 2022 be a good year to build a house? The housing market has been a bit volatile over the past couple of years, which has left many families wondering if they should buy a pre-existing home, remodel the one they currently live in or buy a newly constructed home. Maybe it’s even time to build a custom home? Homebuyers need to consider several factors when buying any home, at any point along that spectrum, of course. For 2022, there are two big economic issues to consider that are outside of your control, first, interest rates are predicted to rise. And second, the inventory of available houses is also expected to rise, which may see overall prices moderate somewhat. So is 2022 your year for buying a newly constructed home? And if so, what is the new home construction process? Let’s talk about the processes, documents, and preparation you’ll need to make if you want to buy a new house this coming year.
When is the Best Time to Buy a New Home?
There are so many individual factors that impact your family’s readiness to buy a new home or build a custom home, that it’s impossible to say without doing a deep dive into your circumstances and needs. The fact is, the best time to buy is when you are ready! Home prices are always going to fluctuate in one direction or another, and the market cares very little about how ready you are or not. With that in mind, careful planning and preparation will ensure that you are ready when it’s right for you. At Derrick Custom Homes, we have helped many Twin Cities area families go through the process of finding the right home at the right time and the right price for them.
Get Ready: House Buying Timeline
Buying a new construction home can take some time. But exactly how long does it take to buy a newly-built house? Whether this is your first home, or you’ve gone through the process previously, it’s important to know what to expect so you can schedule and prepare.
First, it’s important to understand that it takes anywhere from 8 to 12 months to build a new home. Factors that impact this timeline include everything from weather and materials availability to how quickly designs can be created and approved by the customer, especially if this is a custom-built home. Derrick Custom Homes has been building high-quality new homes for more than 50 years, so our deep expertise and relationships with suppliers can make this process much smoother and easier.
Before anything happens in the new home, however, it’s important to get your financial situation and documents in order so that the home building and buying process can proceed smoothly. Start collecting documents, information and getting pre-approved through your financial institution first.
What Documents Do I Need to Buy a House?
In order to set yourself up for success buying a house in 2022, you’ll need to plan ahead now and collect the right documents and pre-approval. Go through this checklist to ensure you’re ready:
- Pay stubs
- Tax returns
- Proof of Employment (and employer contact information)
- Bank statements
- Business documents if you own your own business (tax returns and financial statements)
- Debt information (to illustrate your debt to income ratio)
- Confirmation of property sale and ownership (past and present)
- Statements about stocks, bonds, etc.
- Proof of any additional income sources
- Earnest money documentation (Showing the funds in escrow).
Additionally, you’ll want to work on the following financial documents and processes:
Identify and Polish Your Credit Score
While your credit score isn’t the only thing lenders will look at when doing a pre-approval process. Some other things they review are your current debts compared with your income and borrowing history. This all goes into your FICO score: 300-695 is poor, 660-719 is fair, 720-779 is good, 780-850 is golden. If your credit score isn’t fantastic, work with your lender on a plan to improve it.
Budget to Buy a New Home
Start saving up for a down payment, and create a budget that lists all of the costs that go into buying a new house. This includes the following fees and costs: the home price minus downpayment, fees for home appraisals and inspections, application and origination fees, permit fees, credit report fees, insurance costs, earnest money, and closing costs.
One other question we hear frequently is, "When do you start paying the mortgage on a new build?" Typically, if you are purchasing a new home that has already been built, the process starts from the time you sign the final purchase contract. If you are building a custom home from the ground up, this is a 3-step process:
- You’ll obtain a construction mortgage to pay for the building of the home, and you’ll pay only the interest during this time.
- As construction continues, money is advanced in stages to fund the project.
- After the home construction is finished, the loan amount is due and your lender rolls it over to a regular mortgage, which is then paid in the traditional manner.
How to Purchase a New Construction Home
Once you have a budget and a pre-approved loan amount with a lender, you can start looking for a new construction home or prepare to have your own custom home built. Derrick Custom Homes has several newly-built homes for sale in the Twin Cities area, situated in beautiful developments in great neighborhoods. If you have your heart set on building a totally custom home of your own, we have areas within our developments that are suitable for many types of homes, and it will save you time looking for the right plot of land for your new home. If you feel like 2022 is your year for a new house, be sure to start preparing now, and schedule a consultation with the home building experts at Derrick Custom Homes today to discuss your new home dreams.