My Perfect Mortgage
New or Existing Home: Making the Right Housing Choice
5 minute read
November 21, 2016

You may be facing this question if you are in the market for a new home. Much may even depend upon the housing market in your local area. For example, if you're living in an older city or metropolitan area, with little new construction, buying an existing home may be the default choice. But if you are living in a fast-growing area, where new construction is plentiful, that may be the obvious choice.

Which is the better choice, new or existing? Let's consider the benefits of each decision.

  • available in AL, CA, CO, CT, FL, GA, IL, MA, MD, MI, MN, NC, NJ, NY, OH, PA, SC, TX, VA, WA
  • Simple application
  • Quick decisions
  • Common sense underwriting
  • Fast closing period
  • Lend in all 50 states
  • Veteran lending specialist available to you, no matter where you are
  • In-house processing and underwriting
  • Express Loan Approval program, which allows you to be done with the whole process (minus the contract and appraisal), so you can focus on finding your home.
  • Rate Protect (Lock & Shop) lock in your rate before you even find a home!

The Arguments for a New Home

Buying a new home comes with advantages that are not available with existing properties.

The lure of new. This isn't an objective factor, but an emotional one, and a powerful one at that. Let's face it, all things being equal, most people prefer buying something that's brand-new over something that's "used." A new house is fresh and new - it even smells like it. Also, buying new means that you will be the original owner. That means that the home will be yours from the get-go, rather than one that you took over from someone else and had to customize to your preferences.

Builder incentives. Many new homes come with financial incentives provided by the builder. It could be paying closing costs, below market interest on the mortgage, certain home furnishings, or even membership to a club. Those offers can be too good to pass up, on top of the fact that the home will be brand spanking new.

Complete customization. A new home is like a blank canvas - to use an art metaphor. It's clean and new, and just waiting for you to customize it based on your preferences. That means that you can choose the appliances, cabinets, and fixtures in the kitchen, flooring throughout the home, the bathroom layout, and even the lighting fixtures. That's easier to do with the new home rather than an existing one, as it means you don't have to spend time, effort and money on undoing decorations and preferences that have been installed by the previous owners.

A prolonged repair-free period. All homes eventually need repair and replacement of components. That includes new homes, but you will have a time lasting for several years when you won’t have to repair or replace anything. Not only will that save you money in the early years of homeownership, but it can also provide you with peace of mind. You can live in your home for several years, secure in the knowledge that everything in the house will work as it should. That can be especially important regarding expensive components, such as the furnace, air conditioner, and roof.

The latest equipment. Technology is always improving, and that includes the components in a house. New technology can result in improvements in the windows, composition of the driveway, light fixtures, and appliances. But it can be even more important on big-ticket items, such as the furnace, air conditioner, and water heater. The upgraded components can also offer a money-saving advantage. Since home-related technology tends to be more energy efficient, you could be looking at lower utility bills on an ongoing basis.

The Arguments for an Existing Home

Despite all the advantages of new homes, existing homes offer certain benefits that you can't get when you buy new.

Existing homes cost less. The many advantages with new homes typically translate into higher prices. It's not just that people are willing to pay more for a new home than an existing one. It's also the fact that new homes include the latest construction materials and technology, and therefore cost more to build.

Also, since new homes are typically found in brand-new subdivisions, pricing tends to be uniform throughout the neighborhood. When you buy an existing home, there can be a wide variation in property prices for homes within the same neighborhood. It's easier to follow a time-honored real estate strategy in an existing neighborhood, which is to buy the least expensive home in the most expensive neighborhood you can afford.

You're buying into an established neighborhood. Since existing homes are in established neighborhoods, it's easier to gauge the desirability of the area. For example, you'll have a better idea as to how well the neighborhood holds its value. It will also be clearer how well the neighborhood blends with the surrounding community. This is particularly true of well-established, desirable neighborhoods. They can develop a personality all their own, and one that many potential homebuyers find very attractive.

Existing homes may have a better location. Many older homes are built in very desirable close-in neighborhoods. They may be close to public transportation, public parks, historic districts, or quaint shopping areas. This will give these neighborhoods a big advantage over new construction subdivisions, which are often constructed on the outlining fringes of large metropolitan areas, and require long commutes to reach comparable amenities.

Problems with the property are easier to identify. One of the major disadvantages of purchasing a new home is that long-term problems haven't had time to become visible. One example is settling. All structures settle over time, but the most pronounced effects are generally in the first few years after construction. Settlement can cause structural problems in the home that you won't be able to identify immediately after the home is built. In existing homes, such problems have already become apparent, and often have been remedied.

It's easier to negotiate on an existing home. When the owner of an existing property is trying to sell their home, they are competing with virtually every other home seller in the neighborhood. If a seller is particularly motivated, you have an excellent chance of negotiating a below-market price than you could ever get when buying a new home.

So Which Is Better - New or Existing?

There are advantages to buying either new or existing home; it's mostly about what it is you consider to be the most important. For example, if having a new home – or preferring low maintenance – are your preferences, a new home will obviously be the better choice. But if you're looking for more negotiating room on the price, a more convenient location, or a house in a well-established neighborhood, existing will be the logical choice.

And if you choose one, and later decide that it wasn't the best option, you can always trade-up to a different home in the future. After all, that's the American Way, isn't it?

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.