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  • Writer's pictureJen Bedard

Buying a New Construction Home in Niagara? Here’s What You Need to Know

Buying a new construction home can be an exciting process, but it can also become complicated when there are so many unknowns. With my extensive experience as a realtor within the Niagara region, I have helped countless clients make purchasing their dream homes stress-free and successful. In this blog post, I will share all of the knowledge and tips I have gathered along the way to ensure that your experience buying a new construction home is seamless and enjoyable!


Financing Rules

Financing a new construction loan

When financing a new construction home yourself, there are a few rules that typically apply:


Construction Loan:

In most cases, you will need a construction loan to finance the construction of your new home. This loan is typically a short-term loan that covers the cost of construction and is paid off once the home is completed.


Down Payment:

You will typically need to make a down payment on the construction loan, which is usually a percentage of the total cost of the home.


Credit Score:

Your credit score will be a key factor in determining your eligibility for a construction loan, and you will generally need a good credit score to qualify.


Builder Approval:

The lender may require the builder to be approved before they will approve the loan.

It’s important to work with an experienced realtor who understands the financing process for new construction homes and can help you navigate the draws.


Example: My client, Lisa, was concerned about financing the down payment for her new construction home. I was able to connect her with a lender who specialized in new construction financing, and together we were able to secure the necessary funds to complete the purchase.


Draws for New Construction Homes

new construction buying process

When financing the construction of a new home, the lender will typically release funds in stages, known as draws, to the builder. The draws are based on the percentage of completion of the home and are released after an inspection has been performed to ensure that the work has been completed satisfactorily.


The number and frequency of draws can vary depending on the lender and the terms of the loan, but they typically occur at the following stages:


1. Foundation: The first draw is typically released once the foundation has been completed.

2. Framing: The second draw is typically released once the framing has been completed.

3. Exterior: The third draw is typically released once the exterior work, such as roofing and siding, has been completed.

4. Interior: The fourth draw is typically released once the interior work, such as plumbing and electrical, has been completed.

5. Completion: The final draw is typically released once the home has been completed and the final inspection has been performed.


The Offer Process

new construction offer process

The offer process for new construction homes can differ from the process for resale homes. One significant difference is the timeline. New construction homes can take months or even years to be completed, so the offer process may involve more flexibility regarding move-in dates.

Additionally, builders may have specific requirements for offers, such as a deposit or proof of financing.


The Deposit

When purchasing a new construction home, the deposit process typically involves a series of payments made throughout the construction process. The initial deposit is usually made when the contract is signed, and as mentioned above, subsequent payments are made at various stages of the construction process, such as the completion of the foundation or the framing of the house. These payments are typically structured to coincide with key milestones in the construction process.


The deposit amount for a new construction home can vary, but it is usually a percentage of the total purchase price. In some cases, the builder may require a larger deposit upfront, especially if the construction is already underway. The deposit is usually held in an account until the completion of the home, at which point it is applied to the purchase price.


Rules for Deposits:

There are a few rules that apply to deposits regardless of whether you are buying a new construction home or a resale home:


1. The deposit is usually non-refundable, except in certain circumstances outlined in the contract, such as the seller's failure to deliver the property or the failure to obtain financing.

2. The deposit may be forfeited if the buyer fails to fulfill their obligations under the contract, such as not securing financing or not completing the purchase.

3. The deposit is typically held in an account until the completion of the purchase, at which point it is applied to the purchase price.


Example 1: My client, Sarah, was interested in a new construction home in St. Catharines. She submitted an offer but didn’t include a deposit, which the builder required. The offer was rejected, but I was able to work with Sarah to submit a revised offer that met the builder’s requirements and ultimately resulted in her securing her dream home.


Example 2: Another client, Tom, was interested in a new construction home but was hesitant to make an offer due to uncertainty about the completion date. I was able to provide him with insight into the builder’s timeline and reassure him that he would have flexibility regarding move-in dates, which gave him the confidence to submit an offer and ultimately resulted in him purchasing his new home.


Fees and Details

New Construction fees and details

When purchasing a new construction home, it’s important to understand the fees and details involved. These can include things like closing costs, development charges, and upgrades.


Closing Costs:


Closing costs are fees associated with the purchase of a new home, and they typically range from 2% to 5% of the purchase price. Some of the common closing costs associated with a new construction home include:

1. Title Search and Title Insurance: A title search and title insurance are designed to protect the buyer from any legal claims against the property. The cost of these services can vary depending on the location of the property.

2. Attorney Fees: It is advisable to hire an attorney to review the contract and other documents associated with the purchase of a new construction home. Attorney fees can vary depending on the location and the complexity of the transaction.

3. Appraisal Fees: The lender may require an appraisal of the property to ensure that the purchase price is in line with the market value of the property. The cost of the appraisal can vary depending on the location and the size of the property.


Development Charges:


Development charges are fees levied by the municipality to cover the cost of infrastructure and services, such as roads, sewers, and water mains, that are required to support new construction. These charges can vary depending on the location and the size of the property.


Upgrades:


When purchasing a new construction home, the buyer may have the option to select upgrades to customize the home to their preferences. Some of the common upgrades include:

1. Flooring: The buyer may have the option to select hardwood, tile, or carpet flooring.

2. Kitchen Cabinets and Countertops: The buyer may have the option to select custom cabinets and countertops for the kitchen.

3. Bathroom Fixtures: The buyer may have the option to select custom fixtures for the bathrooms, such as a whirlpool tub or a rain showerhead.

4. Lighting: The buyer may have the option to select custom lighting fixtures for the home.

The cost of these upgrades can vary depending on the extent of the customization and the materials selected.

Tarion

Couple walking through their house being built

The Tarion Warranty Corporation is a non-profit organization that administers the Ontario New Home Warranties Plan Act, which provides coverage for new homebuyers in Ontario, Canada.


The Tarion warranty provides coverage for the following:


1. One-year warranty for defects in workmanship and materials: The warranty covers defects in materials and workmanship for one year from the date of possession of the home.

2. Two-year warranty for defects in electrical, plumbing, and heating systems: The warranty covers defects in electrical, plumbing, and heating systems for two years from the date of possession of the home.

3. Seven-year warranty for major structural defects: The warranty covers major structural defects for seven years from the date of possession of the home. Major structural defects are defined as defects that affect the load-bearing elements of the home, such as foundation, walls, and roof.

The Tarion warranty also provides coverage for deposit protection. If the builder does not complete the home or if the home does not meet certain standards, the homebuyer may be eligible for compensation.


The Tarion warranty applies to all new homes in Ontario that are sold by a registered builder. It is important to note that the warranty only applies to the original owner of the home and is not transferable.


Why Hire Me and Book Private Viewings

Hire Jen Bedard Real Estate Expert for your Buying and Selling Needs

When considering purchasing a new construction home, it’s crucial to work with an experienced realtor like me. I can provide you with the knowledge and expertise necessary to navigate the process and ensure that you are making informed decisions. Additionally, booking private viewings with me can give you the opportunity to view new construction homes before they are available to the general public, giving you an advantage in a competitive market.


Example: My client, Mark, was interested in a new construction home but was unsure about working with a realtor. I was able to provide him with information about the benefits of working with an experienced realtor, including the ability to book private viewings and receive guidance throughout the process. Mark ultimately decided to work with me and was grateful for the knowledge and expertise I provided.


Conclusion

Purchasing a new construction home in Niagara can be an exciting and rewarding experience, but it’s crucial to be informed about the offer process, financing rules, fees, Tarion, and more. By working with an experienced realtor like me, you can ensure that you are making informed decisions and have the knowledge and expertise necessary to navigate the process. Book a private viewing with me today and let’s find your dream home in Niagara.

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