The Ultimate Guide to Buying a New Build Home: Easy Steps and Essential Tips

The Ultimate Guide to Buying a New Build Home: Easy Steps and Essential Tips

Purchasing a new build home is a significant investment for most people. Therefore, it’s crucial to carefully consider each step of the process. This article aims to assist you in finding your dream home by providing essential tips, precautionary measures, costs and taxes, legal issues, and guarantees.

By following our advice, you’ll find it much easier to purchase a new build home in an easy and profitable manner.

Steps to Follow When Buying Your New Home

Here are the key steps to buying your new home:

1. Calculate Your Budget for Buying the House

The first step before embarking on your search is to calculate your budget. It’s impractical to consider homes you cannot afford. Base your calculations on your current and future savings and income to determine what you can afford without financial strain.

Generally, you should have at least 30% of the home’s value saved to cover the down payment (20%) and purchasing expenses (10%).

In your budget calculation, it’s also important to explore different banks to know exactly how much they will lend you based on your credit profile. Once you know your savings and potential mortgage amount, it’ll be easier to determine the final price of the apartment you can afford.

Remember, monthly payments should not exceed 35%-40% of your income.

2. Determine the Type of Home You Need

Along with budget, this is one of the primary considerations before starting your property search. Think carefully about the type of home you need and its location. Ensure your preferences align with your budget: for instance, if you desire a large house but have limited funds, look in the suburbs.

Key aspects to consider include the type of property (ground floor apartment, penthouse, villa, etc.), size, and location (city center or outskirts).

Once you have a clear idea of the property you need and your budget, it’s time to start searching.

3. Searching for the Property

Searching for a new build home is somewhat easier, as the supply is smaller and more localized. Information about new developments can be found on developers’ websites, real estate fairs (offering a wide range of options in one place), and specialized new build property portals.

Thanks to technology, you can view images of the development, take 3D tours, and even see furnished virtual models. These virtual visits can help you shortlist properties for physical viewing later (or their show homes if not yet built).

It’s also worthwhile to consider the developer’s track record.

4. Mortgage Application

Before signing the purchase agreement, confirm with your bank that there will be no issues with the mortgage. When choosing a loan, consider the type (fixed or variable rate) and the conditions that best suit you: interest rate, loan term, benefits of bundled products (credit cards, insurance, etc.).

Remember, there’s often the possibility of assuming the developer’s existing loan on the property. However, check if its terms are more favorable than getting a new mortgage.

Depending on the construction timeline, you might need to sign the mortgage sooner or later (remember, new build homes usually take about two years to complete). Regardless of the mortgage you choose, certain requirements and documents are always necessary.

5. Signing the Purchase Agreement and Deed

Once you’ve found your home and secured financing, it’s time to finalize the purchase with the developer. However, take precautions before signing:

  • Confirm that the development has a building permit.
  • Verify details about the real estate developer: company name, address, financial status, solvency, and registration in the Commercial Registry. If it’s a housing cooperative, check its registration in the regional cooperative registry.
  • Property Registry: confirm who owns the land where the house will be built. Also, verify with the city council that the company has all necessary permits to start construction.
  • Information about the property: ensure the developer provides you with a quality report. This document is essential, as it will allow you to check that the home matches the initial project specifications (material quality, etc.). Also, request a copy of the declaration of new construction, the first occupancy license or habitability certificate, and all documentation related to the property: plans, Building Book, etc. Lastly, gather and keep all promotional material, as it has contractual value.

Carefully review the purchase agreement to ensure it includes all necessary information. It should contain details of the buyer and seller, final house price, payment method, delivery date, and compensation if the developer delays delivery or fails to complete the project.

It’s also crucial to confirm that the contract references the insurance or bank guarantee obtained by the developer for potential compensations, as well as the account where payments should be made.

Finally, ensure that the seller provides all property documentation along with the contract: plans, quality report, property description, building and common area details, habitability certificate, etc.

Signing the notarized deed is the last step. Although notarized deeds are mandatory only for transactions involving a mortgage, they are advisable in all cases for legal security. Remember, the buyer has the right to choose the notary.

budgeting new home purchase

Payments for a New Build Flat

Since most purchases are made off-plan, payments for new builds are staggered. The first payment is made after signing a reservation contract for the property purchase. This amount typically ranges from 3,000 to 10,000 euros.

Upon signing the purchase contract, you must pay 10% of the total property price (deducting the initial deposit). Usually, another 10% is paid in installments agreed upon with the developer and specified in the contract.

Finally, upon key handover, the public deed of the property is executed, and you must pay the remaining balance (using a mortgage if necessary). Remember, along with the property price, you’ll also incur purchasing expenses (taxes, management fees, notarial and registration fees, etc.), which amount to about 10% of the property price.

If you require a mortgage, remember that under the latest mortgage law, you only need to pay for the property valuation and the loan opening commission. And not always, as some banks cover these costs if you take out a mortgage with them.

Also read: Unlock Your Dream Home: A Comprehensive Guide to Buying a Fixer-Upper.

Guarantees When Buying a New Build Home

One of the significant advantages of buying a new build home is the extensive warranty it offers against potential defects, covering three different claim periods (one, three, and ten years) based on the type of deficiency:

  • One-year warranty: covers material damage due to defects in finishing or execution, such as paint issues.
  • Three-year warranty: covers material damage to the building due to defects in construction elements or installations that violate habitability requirements, like dampness or heating system failures.
  • Ten-year or decennial insurance: provides coverage against severe defects, such as material damage to the building caused by faults affecting the foundation, supports, beams, floors, load-bearing walls, or other structural elements that directly compromise the building’s mechanical resistance and stability.

Importantly, these guarantees start from the moment the constructor completes the work, not from the property sale. This is crucial if you’re buying a property that’s been finished for some time: you’ll need to subtract the elapsed time from each warranty period.

As long as the relevant guarantee is valid, the buyer has two years from the damage’s appearance to make a claim (even if the 24 months exceed the warranty period).

It’s advisable to communicate the claim via certified mail for legal documentation. In case of legal action, this serves as evidence. However, it’s usually possible to resolve deficiencies with the developer without resorting to legal proceedings.

Why It’s Easy to Buy a New Build Home

Several factors make purchasing a new build home straightforward:

  • Wide and Varied Offer: The new build market offers a wide variety in types of homes (apartments, penthouses, duplexes, semi-detached, single-family houses…) and locations, with a broad price range to suit all budgets.
  • Fractional Payments: Most new build purchases are made during construction, allowing for progressive payments. This eases the financial burden and provides time to save up for the final payment and find the most suitable mortgage.
  • Extensive Guarantees: Unlike second-hand homes, new builds come with numerous warranties lasting several years, addressing any issues that may arise.
  • Move-in Ready Homes: Forget about extensive renovations before moving in; new build homes are ready to occupy immediately. They often come equipped with the latest appliances.
  • Greater Efficiency: New constructions typically offer better energy efficiency than many second-hand homes, enhancing occupant comfort and reducing monthly bills.
  • Customizable Homes: Lastly, remember that most developers allow you to personalize your home during construction: flooring, finishes, paint, layout, etc.

We hope this guide simplifies your new build home purchasing process.

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