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Buying (and Financing) a Newly Built Home


The process of purchasing a home can be exciting. Opting for a newly constructed house can be even more thrilling as you can customize your home according to your likes and needs. What exactly does it take to purchase a new construction home? Along with the possibility of creating  your dream home, you also need to take into consideration some potential disadvantages.

Learn about the types of new construction homes, the highlights, the potential drawbacks, and when buying a newly built home might be a good idea for you.

Benefits of Buying a New Construction Home

New construction homes offer several advantages for servicemembers and military families. Key benefits to consider include:

Customizable Design

One primary advantage of purchasing a new construction home is that you can customize various aspects of the design. You choose the floor plans, finishes, and details that work with your specific lifestyle and preferences. This flexibility can be a massive boost to individuals or families with special housing needs.

Energy Efficiency

Newly constructed houses are usually built with the most advanced energy-efficient technologies and materials. These designs help optimize the house's energy consumption and lower your utility costs, which can save you money over time. Furthermore, energy-efficient features make your home more eco-friendly so you can align with your sustainability goals and reduce your household's overall carbon footprint, if that is something you are concerned about.

Possible Buyer Incentives

Builders sometimes provide incentives to buyers looking to purchase new construction homes. These incentives may include discounts, upgrades, or even assistance with closing costs. For servicemembers who frequently move or who are transitioning to civilian life, these incentives can make the homebuying process more affordable and accessible.

Move-In Ready Convenience

Newly built homes are usually ready to move in from day one, with minimal repairs or renovations necessary after purchase. This is particularly beneficial for busy servicemembers who may have limited time to devote to home maintenance or improvements. A move-in ready house provides a smoother transition so you can enjoy your new living space right away.

Drawbacks of a New Construction Home

As nice as it may be to customize a new home based on your needs and preferences, new construction homes are not without a few potential drawbacks.

Time to Completion

If you need to move right away, a new construction home may not be ready yet. That’s because there’s unlikely to be a guaranteed finish date for the building of your home. It might take months beyond your moving timeline, making this a less than ideal situation for you.


The materials used in new construction homes, from carpets to paint, often contain volatile organic compounds (VOCs). VOCs can take years to finish off-gassing. Not only can this add a certain chemical smell to your new home, but it can cause health hazards in people with respiratory issues.


All those customizations and design preferences don’t come cheap. Additionally, the use of new materials adds to the higher cost of a new construction home. There are also extra steps to take in terms of making sure all the work being done meets regulations and permit requirements.

Decision Fatigue

Even if the monetary cost of customizing your home seems worth it, think of all the decisions you’ll need to make. This can cause decision fatigue. Picking out colors for each room is one thing, but are you prepared to also choose doorknobs, cabinet finishes, light fixtures, bathroom tiles, and more?

Types of New Construction Homes

Depending on your preferences and needs, there are various design options to consider when searching for new construction homes. Below are three common types of new construction homes:

Tract Homes

Tract homes, also called planned communities, are built on a large section of land, usually in suburban or exurban areas. Some tract homes may be ready for immediate occupancy, while others are still in the planning phase. In the latter case, you can choose a land lot and floor plan before your home is built. 

Tract homes are popular due to their affordable pricing, which is usually achieved because builders purchase materials in bulk. However, be sure to assess the quality of the materials and construction methods used so you know you’re making a good investment.

Custom Homes

Building a custom home involves working closely with a builder to create a unique home tailored to your specifications. The process begins with purchasing land and then collaborating with an architect-builder or entering into a contract with a developer to build on your land.

One of the primary benefits of building a custom home is the ability to personalize every aspect, from layout and room sizes to finishes and amenities. This level of customization allows you to incorporate the specific features that reflect your lifestyle, taste, and any special needs you or your family may have, such as a wheelchair ramp.

Because your custom home is personalized and you are entirely responsible for any design decisions incorporated into it, you may seek advice from design professionals to avoid any issues that may cause you to regret your decisions over time. 

Speculative, or “Spec” Homes

Speculative, or "spec" homes, refer to properties such as single-family homes, townhouses, or condos built by a builder or developer without a specific buyer in mind. These are often taken on by smaller or newer builders in a particular area. Since there is no predetermined buyer to make the decisions, spec homes contain features the builder believes will be most appealing to potential buyers.

One advantage of speculative homes is the potential for buyers to have some input if the home is still under construction. One disadvantage is that the materials used in spec homes may be of lesser quality, as some builders may opt for "builder-grade" or "contractor-grade" materials that don’t have the wow factor or utility you would truly want in your home.

New Construction vs. Existing Home

As you decide whether to purchase a new home or an older, existing one, consider the amenities of each option. New homes often offer modern features, higher energy efficiency, and the ability to customize the details. However, they’re usually more expensive and may require a waiting period until completion.

Existing homes offer established neighborhoods, lower prices, and the option to move in immediately. On the other hand, they may need renovations or updates to fit your lifestyle and functionality.

When deciding whether to choose a new construction or an existing home, you will also want to consider your family's needs, preferred location, budget constraints, desired amenities, and personal preferences. Carefully evaluating these factors and determining which ones are most important to you will help you make a more informed decision.

How to Finance Your New Construction Home

When it comes to financing your new construction home, you have several options:

  • Construction-to-Permanent Loan: This type of loan covers both the construction phase and the permanent mortgage once the home is completed.
  • Government-Backed Loans: Programs such as FHA loans offer financing options for new construction with lower down payment requirements.
  • Traditional Mortgage: Some lenders offer traditional mortgages for new construction homes, requiring a down payment and meeting credit score criteria.
  • Home Equity Loan or Line of Credit: If you already own a home, you may use the equity to finance the construction of a new home.
  • Builder Financing: Some builders offer financing options or partnerships with lenders to facilitate the construction financing process.

Before you choose a financing option, take time to shop around for lenders, get prequalified, and understand the terms and requirements of each loan type. These steps can help ensure a smooth financing process for your new construction home.

Let AAFMAA Help You Finance Your Home

AAFMAA Mortgage Services LLC (AMS) offers loan options specifically for Members interested in new construction homes. Check out our mortgage calculators to help you determine your mortgage payments, how much you can borrow, and more. 

Mortgage loans are just one part of being an AAFMAA Member. Learn more about everything AAFMAA has to offer servicemembers, Veterans, and military families.

This article was originally published September 16, 2021.