While purchasing a new home may sound like a dream to many homebuyers, it can be different than purchasing an existing property. Whether you’re building from scratch or purchasing a new move-in ready building, there are additional steps, timelines, and decisions to consider.
This Redfin article explains everything you need to know about buying a new home. Whether you’re considering an upcoming development in Sacramento, California, or land outside of Milwaukee, Wisconsin, here’s what to consider before you get started.
Important points
New homes are built from the ground up either as part of a planned community or on purchased land. They are usually more expensive than existing homes due to construction and development costs. New construction can take anywhere from a few months to a year to build, depending on size, layout, and location.
1. Decide on a budget
The first step in purchasing a new home is determining your budget. You need to decide whether to build a house from scratch or buy a new one, but knowing how much house you can buy will help you make that decision.
Building a house is often expensive due to factors such as materials and labor costs. For example, according to the 2025 NAHB study, the average sales price for a new single-family home in 2024 was $665,298. By comparison, the median sales price in the U.S. is $429,129, according to February 2026 Redfin data. We recommend setting your budget early to know what is truly affordable.
2. Decide whether to build a house or a move-in ready house.
Knowing your budget will help you decide whether to build a home or buy a move-in ready property. Here’s what you need to know about each option.
Option 1: Build a house from scratch
The first option is to build a house from scratch. There are two ways to do this. You can either buy land and build a home, or you can buy land in a planned community. Purchasing land and building a home is usually more complicated. You will need to find suitable land to build on, hire a builder, apply for permits, and install sewer, water, and electrical lines. This entire process can take 1-2 years.
For many buyers, an easier option is to purchase land in a planned community where construction has not yet begun. In this case, you already have a builder, permits have been applied for, and utility lines are set up, but you are also given the option to choose the layout and finish. Homes in planned communities typically take several months to complete, but be sure to ask your builder about their timeline.
Option 2: Buy a move-in ready home
The second option is to purchase a move-in ready or spec home. These homes are usually under construction or recently completed. If your home is currently under construction, you may be able to negotiate finishes such as paint colors, flooring, and appliance packaging.
You still have the freedom to customize your home, but major structural changes are usually off the table. An agent will have a good idea of what to negotiate on a move-in ready home.
3. Consider the loan that suits you
Once you’ve decided whether you want to buy a ready-to-move home or build a home, you’ll need to evaluate the financing options available to you.
The most common loan types to consider when purchasing a new home are:
Construction-only loans: If you decide to purchase land to build a home on, a construction loan is an option for you. These are short-term, high-interest loans used to finance the construction process. These loans are typically only good for one year and cover the cost of land, building materials, permits, and labor. After this period ends, you will likely need to take out a conventional mortgage. Construction-to-permanency loans: These loans cover the construction process but convert to a traditional mortgage once the home is completed. You’ll need a down payment, but you’ll benefit from paying closing costs only once. Conventional Mortgage: A conventional mortgage is one of the most common types of home loans. This can be a good option if you’re buying a new home or a home in a planned community.
Remember, there are many loan options available, including FHA, VA, and USDA loans. Talking to your lender can help you determine which loan type fits your goals.
4. Find a real estate agent
Regardless of the type of home you purchase, working with a real estate agent is a good plan. If you’re looking to purchase land, it’s important to find an agent with experience in rural, off-grid, recreational, etc. land, as they can identify opportunities and potential risks. A real estate agent can also help you buy a home in a planned community, including making offers, negotiating upgrades, and making sure the closing process goes smoothly.
5. Choose the area you want to live in
Deciding where to build or buy a home affects everything from your daily commute and property taxes to access to amenities and utilities. New homes are usually built away from the city center or in the suburbs. If you plan to purchase land, it may be located in a more remote location.
Many new homes are being sold as part of subdivision developments, and land parcels are also being sold. In some areas, these lots may be smaller than expected and may be closer to neighboring properties.
When purchasing land, you need to consider everything from electricity and internet reliability to utilities and access to amenities. Consider things like how long it takes to complete daily errands, commute time, access to major highways and roads, and proximity to friends and family. Depending on your goals, it may be worth the trade-off.
6. Compare housing manufacturers
Choosing the right home builder is just as important as finding the right real estate agent. The National Association of Home Builders (NAHB) directory is a good place to start your search. Start by reading online reviews, making sure the builder is licensed, and checking out floor plans.
Homes in planned communities typically have several floor plans and models to choose from. Take a look at these and see if they match your needs and desires in your new home. Depending on the contractor, you may be able to modify the layout according to your requests.
There are many important questions to ask a potential builder, including:
What are the standard finishes and upgraded features? What warranty policies do you offer? What is the expected timeline for the home to be built? How long have you been in business? Are you licensed and insured? Do you have a spec house that I can tour?
7. Negotiate changes and contract with builder
Once you have selected a builder, you will receive a contract outlining the expected completion date, deposit, construction materials, finishes, and more. If your home is part of a planned community, certain interior features such as standard appliances, carpeting, base paint color, and trim may already be included in the price.
Typically, you have the option to select additional options such as hardwood floors, upgraded appliances, and crown molding at a higher price. Remember, you can negotiate these high-end features into your existing purchase price.
Your real estate agent can help you read the contract, negotiate it, and make sure it includes everything you agreed to. It can also help you evaluate your builder’s warranty, what will happen if the price of building materials increases, and how to negotiate changes during the building process.
8. Conduct a home inspection and final walk-through
Even after a home is built, a professional home inspection is required. Most new homes include a stage inspection, where a home inspector inspects the home at specific stages of the building process. Even if your home has undergone a stage inspection, the final inspection can help identify issues that were overlooked or that arise later.
If you have problems with wiring, plumbing, or cosmetic mistakes, you can negotiate fixing them with your contractor before officially closing on your home. Home inspections typically cost a few hundred dollars, but this can potentially save you money on major repairs down the road.
You will also need a final walk-through to ensure that everything agreed upon has been completed and the house has been tidied up. In most cases, you and your builder will create a “punch list” that is a list of all the final repairs that need to be completed before the closing date. This includes repairs after the home inspection and minor issues like scratches on the floor or dripping paint.
9. Closer to home
After you pass the home inspection and apply for a mortgage, it’s time to begin the closing process. Your agent or lender will guide you through the process, including reviewing closing disclosures and filing the appropriate documents. We will give you the keys on the closing day and you will be able to move in.
Frequently asked questions about purchasing a new home
How long does it take to build a new home?
On average, it takes about 4 to 8 months to build a house on a condominium. It takes about one to two years to build a house on land. Please note that this will vary depending on location, access to building materials, and complexity of the project.
Can I negotiate for new construction?
Yes, but not in the way you would expect. Most builders won’t negotiate the base price of the home, but you may be able to negotiate upgrades, long warranties, and other concessions.
What is new construction and spec homes?
New construction is a home purchased before it’s built, and you have the option to choose layout, paint colors, finishes, and landscaping. Spec homes are new homes that weren’t built for a specific buyer, so they usually have only the basic features.
Do I need a down payment even if I am building a new house?
Yes, unless you have a zero down payment loan such as a VA or USDA loan. You’ll also likely need a builder’s deposit, which is about 10% of the home’s price and won’t be refunded. It acts as a deposit and covers the initial construction costs.
