Many first time homeowner prospects ask the question: “When it comes to my first home, should I build or buy?”
At Teifke Real Estate, we like to keep our followers as informed as possible. We’ve been a real estate business for the last 12 years, so we’d like to share some of that experience. That’s why in this week’s blog we want to break down the main differences between building & buying – so you can make the best decision possible for your first home.
Buying an existing house
When it comes to buying a home, it’s actually a fairly simple process, and it doesn’t need to be complicated. Here’s a simplified to-do list of how to buy a home:
Link up with a real estate agent
Do all the required inspections
Get documents to the lender
Order an appraisal
For the lending part, you would typically choose one of a couple of different loans. The first being a conventional loan (where you would put 10% – 20% down) or an FHA loan (where you would put 3.5% to 5% down)
It’s typically a straightforward process. You’d have a 10 day option period, 20 days to get your appraisal in, and then 30 – 45 days for closing. You want to have a good realtor, a good lender, and a good title company.
Buying land & building
Buying land gets a little more complicated, and a big part of that is the loan structure. Things change if you’re going to buy the land and hold it, or buy the land and build right away.
The process starts, most importantly, with choosing where you want to be and purchasing the land, and choosing a builder.
You can do an interest-only construction loan through the process to get the money to the builder and complete the project.
Once the project is done, you can wipe out the existing loan and do permanent financing.
This gets a little more complicated because there’s a few moving parts, and it’s possible to get thrown a curve ball. For instance, if builders get drawn out and a project takes longer than anticipated, it costs you money every day if you got the interest only construction loan.
Another big difference is the time frame. Buying land & building could potentially take 6 months to a year, give or take, while the timeline for purchasing an existing home is usually only 30 – 45 days after you’ve identified it.
Overall, the universal rule is this: be around people with experience who know what they’re doing. In both buying & building, having people with knowledge of the industry in your corner is vital. That’s what we specialize in, and what we love to help with.