Here's the Average Mortgage for a Newly Built Home. Can You Swing It?

Borrowers are taking on higher mortgages to keep up with rising construction costs.

There are plenty of benefits to buying new construction, like the chance to customize a home to your specifications and enjoy a never-used space that shows no signs of wear and tear. But the Mortgage Bankers Association reports that mortgage applications for newly built homes decreased 15.2% in October compared to the previous year. And the reason likely boils down to cost.

New construction costs are soaring

These days, home builders are dealing with widespread materials shortages that are making essentials harder to procure. The prices of those materials have also skyrocketed as a result of supply chain issues and shortages, and those costs are, not shockingly, being passed along to buyers.

The price of new construction has gotten so high that the average mortgage amount for a newly built home has risen to over $412,000. That's a sum a lot of buyers can't afford.

Should you buy new construction?

Generally speaking, you'll pay more -- potentially a lot more -- for new construction than you'll pay for an existing home that's the same size within the same neighborhood. If you can afford the higher price tag associated with new construction, it could be worth paying that premium.

In some cases, buying new construction will save you a lot of money on expensive renovations, because if your home is built the way you want it to look and function from the start, you won't need to make changes once you move in. Also, purchasing new construction might save you money on near-term repairs. If you're getting a home with a brand-new roof, heating system, and kitchen appliances, each of those items will likely come with a warranty that protects you from having to pay for repairs if something goes awry.

Plus, it's common for new construction homes to come with at least a one-year builders warranty that covers workmanship issues. This means that if shelving comes loose in your closet after you move in or your kitchen cabinet drawers stop closing, your builder will be obligated to fix those things at no cost to you.

You might also spend less on utility bills if you buy new construction. If your home is outfitted with energy-efficient appliances and windows, that alone could save you a bundle on heating and cooling.

On the flipside, you'll need to weigh the cost of all of those savings against the higher price of a newly built home. And you'll also need to anticipate delays in the construction process. That could end up costing you if you need to vacate your current home by a certain deadline and are forced to secure temporary housing in the absence of being able to move into your new home.

Ultimately, there's no right or wrong answer when it comes to buying new construction. But you should be aware of what buyers are borrowing these days to snag a newly built home. If that number is out of reach for you, then you may be better off purchasing a home that's already been lived in.