Q&A: Buy a New or Used Home?

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Q: I’m in the market for a new home, given the low mortgage rates and my good credit. I think I can get a great deal on a home, but there is one issue. Am I better off buying a new home, or should buy a good resale? — L. Virgilio, Brockton, Mass.

A: You’re right about the low rates and low prices rarely has there ever been a better time to buy a new home. Just know that you’ll need all that good credit you can muster (a 700-plus credit score helps) and you’ll also need a good down payment to clinch the loan between 10% and 20% should seal the deal and help reduce your monthly mortgage payments, too.

As far as a new home versus a “used” one, let’s take a look.

On the surface, new homes are more expensive than similarly-sized resales, primarily because of advanced construction, newer appliances and lower maintenance outlays. For instance, building materials like pressure-treated wood decks last much longer than older decks. Plus, new home sidings typically don’t require painting or significant repair. Newer homes also come with more “green” features these days that reduce utility costs (with amenities like energy-secure windows, cleaner heating and air conditioning units and better insulated attics and basements).

New homes typically feature better safety features, an especially large benefit for young families. Studies show that occupants of new homes are roughly six times likely to die from a fire than a resident of an older home. And newer homes are no longer allowed to use asbestos in housing materials such as pipes and concrete, which eliminates one of the biggest health hazards often found in older homes.

Of course, older homes have some benefits, too. When buying a new home, it’s tougher to bargain with the builder. Homebuilders usually face low margins when selling a new home as is, so they’re tougher to negotiate with if you’re looking to drive the cost of the home down. Used homes are also typically owned by people who, especially these days, are more likely have a “must sell” frame of mind. You stand a better chance of negotiating a lower sell price with a homeowner than with a new one.

Another perk: When moving into an older home, you’re less likely to have to pay homeowner’s association fees, which can add several hundred dollars to your new home’s monthly payment in many brand new communities.

It’s not an easy choice, but if you can wrangle a warranty for home repairs and keep the homeowner’s association costs down, then buying a new home could be a sweet deal. At least you know there aren’t any “under the radar” issues, like mold in the basement, a history of flooding or inheriting a wocky heating unit.

If it’s strictly an issue of cost, you’ll pay less for a used home than a new one. And that’s just basic economics.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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