Buy, build or fix: What’s best for first-time homebuyers?

Buying a new-build home

Buying a new-build home or a newer property that doesn't require many repairs can be an attractive option for many homebuyers. These homes are recently constructed or have been well-maintained, offering modern features, energy efficiency and often a clean slate for personalization.

The process of buying a new or newer home typically involves the following steps:

• Research and budgeting: Begin by researching the real estate market in the area you're interested in. Look for new developments or properties that have been recently built or well-maintained. Determine your budget by considering your financial situation, mortgage preapproval and additional costs like taxes and fees.
• Choosing a property: Visit new developments, model homes or properties listed for sale. Assess your needs and preferences for location, amenities, size and layout. Consider factors such as proximity to schools, workplaces, shopping centers and public transportation.
• Engaging a real estate agent: While it's not always necessary, working with a real estate agent can be helpful, especially if you're new to the homebuying process or want someone to negotiate on your behalf.
• Making an offer: Once you've found a property that fits your criteria, you'll make an offer to the seller or the builder. If it's a new development, you'll likely deal directly with the builder. You’ll negotiate the purchase price and terms. If both parties agree, you'll move forward with the contract.
• Financing: Secure your financing by finalizing your mortgage loan. Provide all the necessary documents to your lender and complete the underwriting process.
• Inspections: In some cases, new or newer homes may still undergo inspections. While the need for inspections may be minimal compared to older properties, you may still want a professional inspection to ensure everything is in order.
• Contract and scheduling: Review and sign the contract, ensuring you understand all the terms and conditions. You may need to put down a deposit or earnest money. Coordinate with your escrow or closing agent to schedule the closing date.
• Final walk-through: Before closing, conduct a final walk-through of the property to ensure everything is as agreed upon and any necessary repairs or changes have been made.
• Closing: On the closing day, you'll sign all the necessary paperwork, pay the closing costs and receive the keys to your new home. After moving in, you can make any desired changes and personalize the space to suit your preferences.

The process of buying a new-build or new-ish home may vary slightly depending on your location and specific circumstances. Also, for new developments, you might be able to customize some aspects of the home — such as selecting finishes, colors or certain upgrades — during the building process.

While buying a newer home often means fewer immediate repairs, it's still crucial to consider any ongoing maintenance and potential warranty coverage from the builder or manufacturer for various property components. As with any major investment, thorough research and due diligence are vital to ensure a smooth and satisfactory homebuying experience.

» MORE: Homebuying checklist

Building a new home

Building a new home, which you can do on your own or in partnership with a home builder, means designing and constructing a residential property tailored to your needs and preferences. It gives you greater control over your home's design, materials and layout, resulting in a unique living space that perfectly suits your lifestyle.

That said, building your own home can be complex and time-consuming. Deciding to build a new home requires careful planning, budgeting and coordination to be successful.

Here's an overview of the process and key steps in building a new home:

• Defining your vision: Begin by outlining your goals and requirements for your dream home. Consider factors such as the number of rooms and their sizes, the architectural style, energy efficiency and any specific features you want to include.
• Budgeting and financing: Determine your budget for the project and explore various financing options, including construction loans, savings or a combination of both. It's crucial to clearly understand your financial capabilities and the cost of building before proceeding.
• Land acquisition: Find and purchase a suitable plot of land for your new home. Consider factors such as location, accessibility, zoning regulations and local building codes. Engage a surveyor to assess the land's boundaries and potential challenges.
• Designing and planning: Hire an architect or professional designer to create detailed plans for your home. Work closely with them to ensure your vision is accurately translated into a feasible and structurally sound design.
• Obtaining permits and approvals: Navigate the bureaucratic process of obtaining building permits and complying with local regulations. This step may involve submitting your plans to the local authorities for review and approval.
• Choosing contractors and suppliers: Research and hire reputable contractors and suppliers to execute the construction of your home. Get quotes and references from multiple sources to ensure you get the best value for your money.
• Construction: The construction phase involves breaking ground and building the actual structure. It typically includes site preparation, foundation laying, framing, roofing, plumbing, electrical work, insulation and interior finishing.
• Supervision and quality control: Oversee the construction process closely to ensure it adheres to the approved plans and specifications. Regularly communicate with your contractors to promptly address any concerns.
• Interior design and finishing: Plan and execute the interior design of your home. This includes selecting materials, fixtures and finishes that align with your vision and budget.
• Final inspections: Once construction is complete, schedule final inspections to ensure the home meets all safety and building standards.
• Move-in: After receiving the necessary certifications and permits, it's time to move into your new home. Take the time to celebrate your accomplishment and settle into your custom-built space.

It's important to remember that building your own home requires patience, diligence and adaptability. Unforeseen challenges and delays may occur, but with proper planning and a reliable team, the result — a home that reflects your unique tastes and needs — can be immensely gratifying.

Weigh the pros and cons carefully before deciding. Building a home is a big decision, and it’s important to be prepared for the challenges that come with it.

Fixing up an older home

Buying and repairing a fixer-upper involves purchasing a property needing significant renovation or repairs with the goal of fixing it up to improve its condition and value.

This approach is often chosen by homebuyers or real estate investors looking to increase their property's equity or create their dream home while potentially saving money compared to buying a move-in-ready house.

Here's a step-by-step overview of buying and repairing a fixer-upper:

• Identifying your budget and goals: Determine your budget for the purchase and renovation of the property. Consider what type of renovations you’re willing to undertake and your long-term goals for the property (resale, rental or personal use).
• Property search: Look for properties listed as fixer-uppers or distressed properties. Real estate websites, local listings, auctions and real estate agents specializing in investment properties can be valuable resources.
• Property inspection: Once you find a potential fixer-upper, conduct a thorough inspection with the help of a professional home inspector. Identify all the repairs and renovations needed, both cosmetic and structural, and estimate the costs involved.
• Negotiation and purchase: Use the information from the inspection to negotiate the purchase price with the seller. Aim to get the property at a price that leaves enough room for repairs and unexpected expenses.
• Creating a detailed renovation plan: Develop a detailed plan for the renovations. Prioritize essential repairs, identify areas where you can save money and consider the design and layout changes you desire.
• Financing: Secure financing for the purchase and renovations. Options include traditional mortgages, renovation loans or personal loans if you don't qualify for traditional financing.
• Permits and regulations: Check local building codes and regulations to ensure you obtain the necessary permits for the planned renovations. Non-compliance could lead to costly delays and fines.
• Assembling a team: Depending on the scope of the work, you might need to hire contractors, architects, interior designers and other professionals. If you plan to do some of the work yourself, ensure you have the required skills and time.
• Starting renovations: Begin the renovation process, following your plan. This may involve demolition, structural repairs, electrical and plumbing work, HVAC upgrades and cosmetic changes like painting and flooring.
• Quality control and managing costs: Ensure the work is done correctly and meets the required standards. Regular inspections of the project can help catch any issues early on. Also, keep a close eye on your budget throughout the process. Unexpected expenses can arise, so it’s essential to have a contingency fund.
• Completion and evaluation: Once the renovations are complete, conduct a final inspection to ensure everything meets your expectations. Evaluate the property's new value and consider whether it aligns with your goals.
• Enjoy, sell or rent: Depending on your initial intentions, you can move into the property and enjoy your new home or sell or rent it out for profit.

It's essential to approach buying and repairing a fixer-upper with careful planning, realistic expectations and a willingness to put in the time and effort required for successful renovations. While it can be a rewarding venture, it also carries risks, so it's crucial to do thorough research and seek professional advice when needed.

“Buying a fixer-upper can mean unexpected costs, not to mention sweat equity, so it’s important to be realistic about your schedule and immediate desires,” said Rob McGibney, executive vice president and chief operating officer of KB Home. Ultimately, you must decide if the home will move you toward your goals.

What to consider as a first-time homebuyer

Whether you’re a first-time homebuyer or an experienced homeowner, it’s crucial to weigh your needs, finances, skills and timeframe before deciding on your potential home purchase.

“The best place to start is to consider your short-term needs and long-term plans and goals,” said McGibney. It’s also important to consider your lifestyle goals, such as starting a family or even “fostering stability as part of a community,” in addition to your financial goals.

“Knowing your motivation — and your budget — will help you decide what your priorities are when looking for a home,” explained McGibney. Some things to consider when weighing your options could include things like your “career plans, location (including nearby businesses), school districts and parks and your personal time.”

Once you’ve determined your wants and needs, you must also ensure your plan fits your financial goals. “Calculate your total budget, including closing costs and monthly expenses,” said McGibney. When considering your monthly expenses, don’t forget to consider your energy costs.

“Many of our customers are first-time buyers, and we hear frequently from them that energy-efficient homes and healthier indoor environments are a big motivator in their decision to build,” said McGibney. “Plus, energy- and water-efficiency can mean savings on utilities and overall lower homeownership costs.”

» MORE: First-time homebuyer benefits

Bottom line

Buying a new-build home can be a great option for those who want a modern, energy-efficient home with customization options. However, it's important to be aware of the potential costs and risks involved, such as construction delays and price drops.

Building a new home or buying a fixer-upper can also be a rewarding experience. However, you must be prepared for the challenges involved, such as the time commitment and the potential for unexpected costs.

Overall, your ideal home purchase option will depend on your needs and preferences. If you're unsure which choice is best for you, talk to a real estate agent, financial advisor or other experts.