because honestly I'm watching this Fallout from the 2123 era where interest rates had just spiked and Builders were desperate to keep buyers coming and what were they doing they were offering aggressive creative financing incentives like a 21 buy down right in the moment but they were not thinking of the long-term implications and I really feel like it's going to screw over a lot of entry-level buyers as well as middle class buyers now we're coming to a point where buyers who built during this time are figuring out that their increased mortgage payment they cannot afford as the home itself falling apart after 2 years so today I want to talk about exactly some of the fine print or a couple years later what people are having problems with with home build and it's not just the home build quality it is the fine print that they overlooked when they were purchasing the new construction home for those of you new here my name is Danielle I am a realtor in the Houston area and I started this channel because I wanted to be the voice that I thought was missing when I myself moved here there's a lot of information out there and a lot of it I feel is very misleading and there's so many gaps in it so I try to be the friend the voice the expert I wish I had when I moved here several years ago all right so the first one I want to talk about because I was just thinking about this earlier this week is the 21 buy down that a lot of Builders initially started offering during the 2023 to 2025 time and I'm sure you heard it time and time again just take the 21 buy down and refinance later when rates go down in a couple of years date the rate marry the house you'll save money and refi before the payments even kick in so yeah it's 2 years later and rates didn't drop in fact in probably many cases they're worse than when you bought so here's what's happening is a good portion of people in 2123 bought with the 21 rate buy down the amazing incentive from the builders where basically year one you have a 5% interest rate year 2 it goes up to 6% and then year three it drops to whatever the interest rate is at that time when now in year three boom you're hit with a 7% rate and on a $400,000 house that is more than a $500 a month increase on your mortgage payment and now I'm going to tell you why this is probably going to end up being a problem for some and we're going to start hearing about this a little bit more the good news is most lenders qualified you for the 7% interest rate when you got the mortgage so even though they are offering you 5% technically you you qualified for the higher mortgage rate which is good this is going to not cause a 2008 type crash situation do you think that they accounted for your property value increase the increase in home insurance costs and the fact that your job employment life status may have changed between now and the few years ago that you were qualified for this loan and that's the reality especially if you're buying in 2025 if you're going to do any sort of temporary rate buy down or interest rate fluctuation please do not rely on the chance that rates might go down or that you're going to get a job promotion or just things that are not 100% guaranteed for the life of the loan do not do it because now we are seeing 2 years later a lot of people were certain rates were going to go down just assume that if you cannot afford the house without any incentives especially to the interest rate then you probably cannot afford that house in general and it is a big risk all right so now let's talk about Houston's best kept secret property tax increases if I had a penny for every time I saw on Facebook groups or Reddit forums why did my property tax bill double after 2 years I'd have a lot more money than I do now but anyways I'll tell you why it's because your lender the Builder lender straight up lied to you when they did your uh closing cost estimate okay they didn't lie but they definitely did not give you the full picture when you first Clos down your home with a builder more than likely at least half the time your closing cost and tax estimate was based on the land value of the home not the home itself the lender also manipulates it so that you are within your ideal monthly payment initially and that's all fine and well but after 2 years when the assessed value comes in and the property taxes you're paying are way lower than the lender told you it would be you come back with a shortage and then your bill raises $800 to $1,000 a month and this is so so common even when you think you're calculating the monthly payment with the known tax rate on your assessed value for whatever ever reason it still comes up as a shortage and it is a huge jump in your monthly payment and most of the time people are freaking out because they had no idea this was coming because they were under the assumption the lender was doing all the calculations based on the assessed value with the house not just the land when they're doing all the monthly payment things it is such an easy thing that slips by and there's so many other costs associated with buying the house that it's very easy for these lenders to manipulate it and they don't care because they close so many houses a month that 2 to 3 years from now they're not going to care what happens or what you need to pay that's your problem later and you guys this is happening every single day I'm in Facebook groups Reddit forums and just talking to people and this is the number one complaint I hear is that their property taxes were not assessed correctly when they built the home also you need to be prepared for an escrow shortage because even initially if they tell you what your long-term monthly payment will be initially it is going to be smaller because they're only going to be doing the first couple years on the land so there will be that increase in your taxes on year two so no matter what just be prepared for that do not assume that the payment you get initially is going to be your payment forever another hidden cost that comes up with owning a new construction home here that a lot of people were not expecting is Insurance a few things to keep in mind when it comes to property insurance here is number one Texas leads the nation and weather related events especially with insurance claims I mean we have hurricanes floods hail freeze events you name it we'll probably have it at least once a year here of some sort of weather event a lot of major Insurance have pulled out of Texas or they are raising the premium so much have a new construction home but just even as an existing homeowner here in Houston I have also fill the insurance rates in 20122 my policy was 3371 then it was 4,244 and 23 and this year it is$ 4,952 so as you can see over the last couple of years it has raised more than $1,000 a year that is definitely something people need to consider when they are buying a new home here so think about it if you had the 21 buy down and then you had a property tax increase at year 2 as well as property insurance increase what do you think is going to happen in the next several months with all these people who bought cheap homes is definitely a thing here there was there is supposedly a housing shortage but here in Houston we have tons of land and low barrier of entry for production builds I mean we have the lowest codes possible for new construction homes here so it is super easy for them to build a ton of homes here at a very affordable price problem with that with affordability and quantity usually equates to crap I'm sorry but a lot of the homes that are being built are not built to last they are not built for the future they're not built for appreciation they're not built for long-term value in fact I think a lot of the houses being built won't even last 30 years using cheap material they're using Rush labor and what you get is a home that barely passes code that they can sell you I scoured the internet Facebook my own personal buyers Reddit forums and there's a lot of HVAC issues we've had a ton of lawsuits around mold things not being sealed properly had a lot of problems with foundations so there's so many issues that coming with these new construction hes and it's coming at a cost to you um so I would really really recommend especially if you're going with an entry-level high production Builder to get a third- party inspector and to use someone to help you buy a home to make sure you're making the best decision possible I don't want to scare you guys and discourage you from new construction but there are a lot of gimmicky things out there that nobody talks about now of course I'm only talking one-sided of things there are a lot of great things about new construction too and there are a lot of great Builders out there and great communities but I definitely want to be the voice that warns you of the things that nobody talks about and to make sure that when you're looking at your escrow balance and you're looking at your closing costs and you're looking at your loan terms that you understand that's only the first year at year two things are going to change and a lot of people just don't warn you about it anyways if you found this video helpful please like And subscribe as it helps the algorithm know that this is good and information and as always thank you so much for watching I truly do appreciate it and I will see you next time