New build or existing home? Weighing the pros and cons

Choosing between buying a new construction home and an existing home can depend on what you’re looking for. Newly built, custom homes offer modern designs, energy efficiency and less maintenance, but they can be pricier. Existing homes might have more charm and be more affordable but could need updates.

Many homebuyers seek out new construction for its move-in ready condition, while others appreciate the character of existing homes.

As a recent National Association of Home Builders (NAHB) study noted, 61 percent of homebuyers favor new custom homes, the highest percentage seen in 17 years. A new home can be custom-built or built-for-sale. The study shows a marked increase in the number of buyers who prefer a built-for-sale home.

Here’s what you can expect when buying a new construction home versus buying an older home:

1. Cost

New construction:

• Median new home construction prices may be higher upfront, starting at approximately $429,000.*
• Builders may offer incentives, such as buying down the interest rate, pre-paying property taxes, covering home insurance or providing concessions for closing costs.

Existing home:

• Median existing home prices may cost less upfront, starting at approximately $394,000.*
• May require renovations and repairs, depending on how old the home is, adding to long-term costs.

2. Customization

New construction:

• High degree of customization.
• You can choose or customize your own floor plans, finishes, features, colors and upgrades.

Existing home:

• Limited customization.
• Renovating requires time and money to replace or redesign rooms and existing features.

3. Energy Efficiency

New construction:

• Generally higher.
• New construction meets modern building codes and includes energy-efficient features.

Existing home:

• Can vary greatly.
• Older homes may have outdated insulation, windows and appliances, leading to higher energy bills.

4. Location

New construction:

• Often built farther from city centers, which can increase travel time to work and attractions.
• Might lack established community feel with mature trees and have less walkability.

Existing home:

• May be built in or near city centers in established and/or in-demand neighborhoods.
• Often located in areas with mature trees, walkability and access to parks, schools and shopping.

5. Maintenance

New construction:

• Comes brand-new and may not need significant maintenance for several years.
• Typically includes warranties on new appliances, systems and structural components.
• May need to add landscaping after purchase as an added cost.

Existing home:

• May need immediate repairs (roof, plumbing, electrical) and ongoing maintenance.
• Potential for “unpleasant surprises” even with an inspection—i.e., a home needing more upkeep than anticipated.

6. Time

New construction:

• May be able to move in right away with a built-for-sale home.
• Could take six months or longer to build your own home and wait for permitting and each phase of construction to be completed.

Existing home:

• Usually move in right after closing on your loan.
• May experience delays if there are multiple offers and negotiations in a competitive market.

Find out which home is right for you: Get personalized guidance.

Buying a new construction home that’s built-for-sale is like buying an older home. Once you find a house that you’re interested in, you can secure financing by getting pre-qualified and choose a loan that works best for your financial situation.

Loan types may include:

• Conventional loan: Requires a minimum down payment of 3 percent and a credit score of at least 620.
• FHA loan: Requires a minimum down payment of 3.5 percent and a credit score of at least 580. (A lower credit score may require a higher down payment.)
• USDA loan: Requires no down payment for eligible rural properties and a credit score of at least 540.
• VA loan: Requires no down payment for eligible veterans, active-duty service members and surviving spouses and a credit score of at least 540.

To finance the construction of a new custom home, loan types may include:

• Conventional construction-to-permanent loans: Typically requires a minimum down payment of 5 percent with no minimum credit score requirement for most loans.
• FHA construction loans: Requires a minimum down payment of 3.5 percent.

Some builders can also work with lenders to provide special discounts for their buyers.

For example, some builders who work with Guild Mortgage loan officers offer the StrongStart program**, which covers your mortgage interest for up to five months. Other potential programs include temporary and permanent rate buydowns, extended rate locks (where you can lock in a lower rate while the home is being built) or even bonus upgrades like a pool or solar panels.

Connect with your local Guild loan officer to discuss your goals and options.