‘Buying New Construction Meant I Scored a 5.25% Mortgage Rate’
When Jonathan Ayala first started his search for a home in Hoboken, NJ, new construction wasn’t in the mix.
For this real estate agent and owner of the photography and marketing business Real Estate Photography, numbers drove the search—and not just list price.
He saw 10 homes in person, but none of them made sense for him to purchase.
“I wanted to see the condition of each property, what repairs and upgrades were recommended, and the financing and overall cost of owning each property,” he says.
Several of the homes he saw needed new roofs and one had water damage. And even if he managed to negotiate a lower asking price, it wouldn’t be much of a win given the massive work needed to make the homes move-in-ready.
“It was both exciting and frustrating,” Ayala says of the house hunt, which lasted roughly a month.
Quickly, the process became a “numbers game” as he was comparing the asking price against the cost to repair and renovate each home.
“These homes were appealing at first, but all the repair, renovation, and maintenance and other costs can add up fast,” he says.
When a new-construction home within the same price range popped up in his search, he switched focus.
The benefits of new construction
Ayala found a three-bedroom, 2.5-bathroom townhouse in Easton, PA, listed for $575,000.
He started talking with the builder and discussing the terms of a possible sale, and that’s when he learned that there were incentives to sweeten the deal.
“The incentives were not offered right out of the gate,” he says.
Ayala did have to use the builder’s preferred lender and title company to qualify for the full incentive package.
In doing so, he was able to acquire $30,000 in incentives “divided between closing costs, a mortgage-rate buydown, and upgrades.”
“For me, the $30,000 was a more meaningful incentive because it lowered several real costs of the home purchase versus just a headline number.”
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Breaking down the important math
The deal included $15,000 toward closing costs, $10,000 toward a mortgage rate buydown, and $5,000 on interior finish upgrades.
The mortgage rate buydown took his rate from a possible 6.25% to 5.25%.
“This lowered my monthly principal and interest payments by about $350 compared to the rate I would have received,” he says.
He was also able to negotiate the purchase price down from $575,000 to $545,000. After putting down $109,000, aka 20%, this means his monthly mortgage is $2,408.
After talking with the builder, Ayala returned to the numbers.
“I did a much closer comparison with the pre-existing homes that I had already looked at and was considering—that’s when the offer became that much more interesting.”
He returned to the builder and toured a townhouse that had already been completed.
“I was able to evaluate the actual finished property—and that was important to me,” he says. “I didn’t want to make a decision based on the appeal of a model home. I wanted to make a decision based on what I would actually purchase.
“Walking through the finished home gave me a real feeling of it—it was not a leap of faith,” he says.
After the numbers were agreed upon, the transaction was easy, with a smooth closing. Most of all, he’s feeling satisfied about choosing this home.
“There’s no question—I got a much better package overall by buying new construction.”
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