Buying a New Construction Home: Step-By-Step Guide

Posted by Dave Kotler on Thursday, February 13th, 2025 at 8:46am.

Taking the plunge into buying a new construction home might feel like a significant life change, but it doesn't have to be overwhelming. With the right guidance, you can smoothly navigate through the maze of choices and decisions that await. When buying a new home, you’ll want to start by exploring the various home types available, each offering a list of unique benefits. Next, there's the important task of selecting a builder with a solid reputation and evaluating their benefits. However, before you start shopping for new construction homes, it's important to consider the financial journey tied to the process.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

How to Buy a New Construction Home in 5 Steps

1. Choose a Builder & Community: Research builders and communities matching your needs, budget, and lifestyle. Visit model homes, read reviews, and compare floor plans, locations, and amenities.

2. Financing & Pre-Approval: Work with a lender to get pre-approved for a mortgage, which helps determine your budget and strengthens your buying position.

3. Design Your Home: The design process varies by home type. Choose the home design that fits your needs and select upgrades, finishes, and optional features. Builders often have design centers where you can personalize flooring, countertops, cabinets, and more. Be mindful of the cost of upgrades, as they can add up quickly.

4. Find Accommodations During Construction: During the construction phase, buyers should arrange temporary living accommodations by renting, staying with family, or securing short-term housing to ensure flexibility for potential delays.

5. Final Walkthrough & Closing: Conduct a final walkthrough to inspect the home for any issues that need fixing and complete the closing process.

What Are the Types of New Build Homes?

When considering new construction homes, you'll find they generally fall into three main categories: pre-construction, spec, and custom homes.

Pre-Construction Homes

Pre-construction homes are purchased before they are built, allowing buyers to choose from a builder’s floor plans and select finishes and upgrades. These homes are often part of larger developments and come with fixed pricing, though delays in construction timelines can occur. Buyers typically make deposits in stages, with full ownership transferred upon completion.

Pre-construction homes typically follow a staggered deposit payment schedule, where buyers make payments in installments leading up to the home's completion. The structure varies by builder but often starts with an initial deposit (e.g., 5%-10% of the purchase price) when signing the agreement. Additional payments may be required, such as another 5%-10% at 30, 60, or 90 days and further installments at milestones like excavation or framing.

In some cases, builders offer extended deposit structures that spread the cost of building a home over several months or years. The remaining balance is due at closing when the mortgage takes effect. Buyers should carefully review the builder’s deposit requirements and ensure they align with their financial plans.

Spec Homes

Spec homes, or speculative homes, are built by developers without a specific buyer in mind. They offer move-in-ready options with professionally chosen layouts and finishes. These homes are ideal for buyers who want new construction without the wait, though customization is usually limited to minor adjustments if the home is not yet completed. Unlike ready-to-move manufactured homes, these houses are built on site.

Custom Homes

Custom homes are fully personalized residences built to a buyer’s specifications, which usually requires buying vacant land. Buyers work with architects and builders to design everything from the layout to materials, allowing complete control over the home’s features. This process requires more time, planning, and a larger budget, resulting in a one-of-a-kind living space.

How to Choose a Builder

After familiarizing yourself with the different types of new construction homes, it's important to shift your focus to researching potential builders and developments. Start by researching the best home builders in your area. Check online reviews and ratings on platforms like the Better Business Bureau. Feedback from previous homeowners can provide valuable insights into the quality and reliability of the builders you're considering. You can even check your local homebuilder’s association.

Next, evaluate the types of new construction homes that each builder offers. This will help you determine which best suits your needs and budget. Visiting model homes is essential, as it allows you to assess the builder's craftsmanship firsthand. Pay close attention to available upgrades and make sure that standard features match the showcased materials.

Be sure to investigate local developments to confirm the neighbourhood suits your lifestyle. Consider community amenities like schools, parks, and shopping areas. Don't forget to inquire about builder incentives and financing deals, which can offer significant benefits. Home warranty coverage is required in many provinces, guaranteeing your new home is protected. With thorough research, you'll make informed decisions and find a builder and development that perfectly matches your vision.

How to Get a Mortgage For a New Build Home

Getting a mortgage for a new build home follows a similar process to buying a resale home but requires additional planning. Buyers need to get pre-approved, verify income, and make a down payment.

For pre-construction homes, lenders may offer longer rate holds (up to 24 months) to account for the construction timeline. Since deposits are paid in stages, buyers must have sufficient savings or financing in place. At closing, the mortgage is finalized, covering the remaining home purchase price balance.

For custom homes, a construction mortgage might be required. Construction loans provide financing in stages as a home is built rather than a lump sum upfront. Lenders release funds in draws at key construction milestones—such as land purchase, foundation completion, framing, and final inspection—ensuring the project progresses as planned. These loans require detailed builder contracts, appraisals, and inspections to secure approval, and they often come with higher interest rates due to the increased risk for lenders.

Customizing Your Home Features

Now, the exciting part! Customizing your home features is one of the main reasons people choose to build vs. buy. But it requires careful planning.

First, understand the customization options that are available to you. If you've chosen a custom home, you'll enjoy the freedom to personalize nearly every aspect when building the home. For spec and pre-construction homes, options may be more limited, focusing on specific upgrades.

Schedule a design consultation as soon as you've signed the contract. This meeting is essential for selecting your preferred finishes, fixtures, and layouts. While it's tempting to opt for every upgrade available, it's important to reflect on their impact on your overall budget and the practicality of each feature. Prioritize upgrades that add long-term value, such as premium flooring, high-quality kitchen finishes, and energy-efficient appliances.

Finalizing Purchase & Closing

Once you've made your customization choices and finalized your design details, it's time to focus on the final steps of purchasing your new construction home. Begin with the final walk-through, as this is a vital step to guarantee that any agreed-upon repairs are completed and everything is in order before closing. Address any last-minute issues during this inspection to avoid future headaches.

Next, prepare for the closing process. You'll need to coordinate closely with your lender and the builder to guarantee all documentation is accurate and ready. Builders will often have a preferred lender, which may help streamline the process, but remember, you're not obligated to use a particular financier. During this process, you’ll provide the full down payment, which consists of your original deposit and any additional necessary amounts, to finalize the purchase price of your new home.

At closing, you'll also pay closing costs, including fees for appraisals, inspections, and even legal services. Once all paperwork has been signed, your monthly mortgage payments will begin, marking the start of your financial responsibilities as a homeowner. This can be a significant shift, so ensure you're financially prepared for these ongoing obligations while enjoying your new space.