Overview
Buying new construction involves different mortgage decisions than buying resale. Many production builders (Lennar, DR Horton, Pulte, KB Home, Toll Brothers) offer in-house lending with significant buyer incentives — rate buydowns, closing-cost credits, or design-center allowances — when you use their preferred lender. These incentives can be worth $10,000-$30,000 on a $400K home.
Always shop the builder's lender against an independent lender. The builder incentive is real, but the rate or fees from their in-house lender may not be competitive. Get a second quote on the same scenario from an independent lender; if it's meaningfully better even after losing the incentive, use the independent lender. Sometimes the builder will negotiate to keep your business.
If you're building custom (not buying from a production builder), you need a construction-to-permanent loan that disburses funds in draws during construction then converts to a permanent mortgage at completion. One-time-close construction loans avoid two sets of closing costs. FHA and VA both offer construction options, though they're less common than conventional construction loans through banks and credit unions.
Recommended loan programs
Frequently asked questions
Should I use the builder's preferred lender?+
Maybe. The builder's lender often offers buyer incentives (rate buydowns, closing-cost credits) that are real and meaningful. But their rates and fees may not be competitive. Always get a competing quote from an independent lender on the same scenario. If the independent lender is meaningfully better even after losing the incentive, use them. Sometimes the builder will negotiate to keep your business.
How do I lock my rate during construction?+
Most production-builder closings use a short rate lock (30-60 days) close to your move-in date. Custom construction-to-permanent loans typically lock the rate at the initial closing and the lock covers both the construction phase and the permanent loan. Extended rate locks (180-360 days) are available on some products for additional cost.
Can I use FHA for new construction?+
Yes. FHA finances new construction with the same 3.5% down payment as resale homes, as long as the home meets FHA's Minimum Property Requirements. Some FHA-specific options include the 203(k) New Construction program and standard FHA financing of builder-completed homes. VA construction loans work similarly.
What if there are construction delays?+
If you're buying production-built (already-under-construction), most contracts have rate-lock extension provisions for builder-caused delays. If you're doing custom construction-to-permanent, the loan typically allows 6-12 months of construction with extensions available (sometimes with a fee). Communicate timeline changes to your lender early.