New Build Secrets Exposed: What Home Buyers Need to Know About New Construction Homes in Phoenix

Disclaimer: This article was created with the assistance of artificial intelligence (AI) and has been reviewed, edited, and fact-checked by a human editor.

New Build Secrets Exposed: What Home Buyers Need to Know About New Construction Homes BEFORE BuyingPhoto byKelly Cook

Are you considering buying a new construction home in Phoenix? While the allure of owning a brand-new home is exciting, there are some important details builders might not readily share. From hidden loan fees to rising homeowners insurance costs, purchasing new construction can come with surprises. In this blog, we’ll expose the top five secrets you need to know before signing on the dotted line. Whether you’re drawn in by the lower interest rates or the promise of a shiny, new home, it’s essential to be informed before making your investment.

Loan Fees and Rate Buydowns: What You Need to Know

One of the most attractive selling points for new construction homes in Phoenix is the offer of lower interest rates through a “rate buydown.” However, this is a temporary solution. Builders often present a 2-1 rate buydown, which means you pay 2% lower than the market rate in the first year and 1% lower in the second year. After that, your rate jumps back up to the original amount for the remainder of the loan. While this can be appealing, it’s crucial to understand that you must be able to afford the fully indexed rate to avoid financial strain in the future.

Tip: Always consider if you can afford the fully indexed rate before committing to a buydown. Temporary relief can be enticing, but planning for long-term financial stability is key.

Understanding Property Taxes and Community Facility Districts (CFDs)

Property taxes in Phoenix can be a bit misleading when it comes to new builds. Builders may not initially explain that the property tax you see only reflects the value of the land, not the home’s value after completion. This means your taxes will increase once the home is fully constructed. Additionally, some new developments have Community Facility Districts (CFDs), which are additional taxes levied to cover infrastructure costs for the neighborhood. CFDs can add up to 1% or more of the home’s purchase price to your monthly payment.

Stat: Maricopa County has an average property tax rate of 0.64%, but in areas like Pinal County, rates can be as high as 0.75%.

Homeowners Insurance: An Unexpected Cost Hike

Homeowners insurance rates have been rising steadily, with an increase of over 20% from 2021 to 2023. This is something to consider when purchasing a new construction home, as insurance costs can significantly affect your monthly mortgage payment. In some areas of Phoenix, you may also need flood insurance, depending on the neighborhood’s location. The cost of insurance is an often-overlooked factor that can impact your home-buying budget.

Mistake to Avoid: Skipping insurance quotes before closing. Get an accurate insurance estimate early in the home-buying process to ensure it fits within your monthly budget.

HOA Fees: What You Should Know About Ongoing Costs

Nearly every new construction community in Phoenix comes with an HOA (Homeowners Association), and these fees can vary greatly depending on the neighborhood. Gated communities or those with more amenities will typically have higher HOA dues, which can add a significant cost to your monthly expenses. Additionally, some communities may have one-time fees, like a community enhancement fee or capital improvement fee, which you’ll need to account for when budgeting for your new home.

Tip: Negotiate with the builder to cover a year or more of HOA fees upfront. This can save you money in the first few years of ownership, especially in high-end communities.

Builders’ Representation vs. Hiring Your Own Realtor

One of the most critical secrets to know is that the builder’s representative in the sales office works for the builder, not you. They have the builder’s best interests in mind, which means they might not fully disclose certain costs or fees upfront. Hiring your own real estate agent—who represents your interests—can make a world of difference. In fact, it won’t cost you extra, as builders typically include the agent’s commission in the overall home price.

Stat: A qualified realtor can help negotiate additional incentives, like closing cost credits or upgrades, which are often not public knowledge but can save you thousands.

Buying a new construction home in Phoenix can be a dream come true, but it’s essential to understand the hidden fees and potential pitfalls that may come with it. From loan fees to property taxes, insurance, and HOA dues, being informed will help you make the best financial decision. Always consider working with a seasoned real estate professional to ensure you’re getting the best deal and avoiding any costly surprises down the road. Ready to take the next step? Contact us today to help you navigate the new construction market in Phoenix!

We have so many people contacting us who are moving to the Scottsdale/Phoenix area, and we are so happy to make the transition easier for them. If you have any additional questions about all the things that come with living in Phoenix, Arizona, reach out to us at info@cookandassociatesaz.com or by phone at (480)660-5974!