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A newly built two-story home in a Dallas neighborhood with clean landscaping and a ‘Sold’ sign, symbolizing new construction homeownership

Financing a New Construction Home: What’s Different?  

May 21, 20253 min read

Financing a New Construction Home: What’s Different?

By Steven Thomas, Refind Realty

A newly built two-story home in a Dallas neighborhood with clean landscaping and a ‘Sold’ sign, symbolizing new construction homeownership

Introduction

Financing a new construction home isn’t the same as buying a resale. If you’re planning to build or buy a brand-new home in Dallas, you’ll want to understand how the financing process works, what lenders look for, and how builder relationships come into play. I work with buyers every week who are navigating this process. Here’s what I walk them through to make sure they’re well prepared.

What Makes New Construction Financing Different?

With resale homes, the home already exists. The lender can appraise it, process your loan, and get you to closing in about 30 days. New construction comes with more variables. The home might not be built yet. It may take six to twelve months to complete. And builders often have their own set of requirements and lender relationships.

Key differences include:

  • Longer timeline before closing

  • Rate lock challenges due to build delays

  • Potential for construction or builder financing

  • Appraisal timing near completion

Each of these adds a layer to the financing strategy you’ll need.

Two Main Paths for New Construction Loans

1. Builder-Financed (Spec or Pre-Planned Home)

This is the most common scenario in DFW. The builder starts or finishes the home before selling, and you close with a traditional mortgage.

  • Often includes incentives like closing cost credits or rate buy-downs

  • Builder prefers you use their in-house or preferred lender

  • Easier process for first-time or busy buyers

2. Construction-to-Permanent Loan (Custom Home or Build-on-Your-Lot)

This is used when you're starting from scratch and need to finance the build itself.

  • One loan covers construction and converts to a mortgage when the home is done

  • More lender involvement throughout the building process

  • Interest-only payments during construction phase

I always recommend speaking with a lender early to know which path fits your plans.

Choosing the Right Lender Matters

Some builders offer great incentives for using their lender. Others allow flexibility. I always help my clients compare offers to make sure they're not leaving money on the table.

Don’t just accept the builder’s lender offer without comparing. Sometimes the rate or fees don’t work in your favor long term.

Start your financing journey here:
👉 Get Pre-Approved

Common Loan Types Used for New Construction

  • Conventional Loans
    Standard for most buyers. Pair well with builder-financed homes.

  • FHA Loans
    Offer lower down payments. Good for first-time buyers.

  • VA Loans
    Eligible for veterans and active military. May include new construction options.

  • Construction Loans
    Used for fully custom builds. Higher down payment and more involvement required.

Rate Locks and Timing Risks

Since build timelines can stretch 6 to 12 months, locking in your rate becomes more complicated. Some lenders offer long-term rate locks, sometimes for up to 270 days, with float-down options if rates drop.

Ask these key questions:

  • Can I lock my rate now?

  • Is there a fee for extended lock periods?

  • What happens if my build is delayed?

I work closely with lenders who handle these scenarios all the time and keep buyers protected.

FAQs

1. Can I use any lender when buying new construction?
Yes, but the builder may offer better incentives with their preferred lender. Always compare.

2. Do I need a special loan for custom homes?
Yes. A construction-to-permanent loan is typically required for custom or build-on-your-lot homes.

3. When do I start making payments?
With standard financing, after closing. With a construction loan, you pay interest-only during the build.

4. Can I lock my mortgage rate while my home is being built?
Yes. Many lenders offer extended rate locks with float-downs.

5. Do I need a bigger down payment for new construction?
Not always. Most builder-financed homes allow the same down payments as resale homes. Custom builds may require more upfront.

Conclusion

Financing a new construction home takes more planning, but it doesn't have to be stressful. Whether you're buying in a new community or building from scratch, I'm here to guide you every step of the way—from selecting a builder to working with the right lender.
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Steven J Thomas
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Owned and Operated by Thomas & Thomas Financial Group, LLC

Steven J. Thomas

Steven J. Thomas has been in the financial services industry for the past 19 years and started my career as a Financial Planner for American Express Financial Advisors. I entered into banking with JP Morgan Chase as personal banker in 2003 and was promoted several times up to Small Business Specialist. I earned multiple Million Dollar Club awards and was ranked in the top 5 Small Business Specialist before I branched out in 2005 to start my own Financial Management Company. I ran a successful company before family circumstances lead me to Wachovia Bank in 2008 where I worked as a Senior Financial Specialist. As a Sr. Financial Specialist; I was responsible for the P & L and revenue growth of my banking center. The elimination of my role thru a bank merger lead me to BBVA Compass. I have held various leadership roles at BBVA Compass including Personal Relationship Manager, Branch Retail Executive, Workplace Solutions VP, and his current role as a Retail Manager. As the Regional Workplace Solutions VP, I was responsible for the strategic, tactical, and execution of Partnership Banking relationships, promotion and activity with corporate and non-profit companies in my footprint. I was responsible for the acquisition production for three districts, which includes 51 banking centers and over 300 employees. In May of 2014, I joined the team at Refind Realty and became one of the managing partners in mid-2015.

  • 50+ 5 Star Reviews

  • Over $60,000,000 in Total Real Estate Sales

  • 167 Properties Sold

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succesfull real estate agent testimonials

I used this realtor and it was a great experience. He was patient and very helpful with our journey. He also helped us find a great lender with little hassle on the process, also got us approved for well above the market of our original home so we were able to get more house with a lower mortgage rate. So to anyone who is interested in buying a home take my advice give Steven a call. It’s worth it 😁

Bryant Loring

Steve was absolutely amazing! Everything was easy! Very professional in all aspects. Punctual, responsive, and diligent. He goes above and beyond to ensure you get to see as many homes as you’d like no matter the location. Not only was he knowledgeable about home buying, he also has a resourceful network for new home owner needs. I recommend Refind Realty to everyone!

Nicholas Bishop

I definitely recommend Steven to assist with your home buying needs. As a first time home buyer the process can be overwhelming, but as my realtor he was knowledgeable & patient while addressing my concerns and assisting me with my new home purchase. Thanks again Steven!! :-)

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Ask Us Anything

Frequently Asked Questions

Why do you need a Realtor?

When buying or selling a home, there are so many options…which can also present a lot of obstacles. Laws change, forms change, and practices change all the time in the real estate industry. Because it’s our job to stay on top of those things, hiring a realtor reduces risk, and can also save you a lot of money in the long run.

When you work with me as your Realtor, you’re getting an expert who knows the area; knows how to skillfully guide your experience as a seller or buyer; can easily spot the difference between a good deal and a great deal. My job is to translate your dream into a real estate reality, and I work hard to earn and keep my business. This also means earning your trust: When you work with me, you’ll be working with a realtor who looks out for your best interests and is invested in your goals.

Which loan should you choose?

There are two different types of loans conventional loans and government-backed loans. The main difference is who insures these loans:

1 - Government-backed loans (FHA, VA and USDA):

(a) - Are, unsurprisingly, backed by the government.

(b) - Include FHA loans, VA loans, and USDA loans.

(c) - Make up less than 40 percent of the home loans generated in the U.S. each year.

2 - Conventional loans

(a) - Are not backed by the government.

(b) - Include conforming and non-conforming loans (such as jumbo loans).

(c) - Make up more than 60 percent of the loans generated in the U.S. each year.

What is the difference between FHA, VA and USDA loans?

1 - FHA LOANS:

FHA loans, which are insured by the Federal Housing Administration, are typically designed to meet the needs of first-time homebuyers with low or moderate incomes. FHA loans can be approved with a down payment of as little as 3.5 percent and a credit score as low as 580.

FHA loans are often called “helper loans,” because they give a leg up to potential borrowers who may not be able to secure one otherwise. For this reason, FHA loans have maximum lending limits, which are determined based on housing values for the county where the for-sale home is located.

Because the agency is taking on more risk by insuring FHA loans, the borrower is expected to pay mortgage insurance both at the time of closing and on a monthly basis, and the property must be owner-occupied.

2 - VA LOANS:

VA loans are backed by the Department of Veterans Affairs and they are guaranteed to qualified veterans and active-duty personnel and their spouses. VA loans can be approved with 100 percent financing, meaning VA borrowers are not required to make a down payment.

Unlike FHA loans, borrowers do not have to pay mortgage insurance on VA loans.

3 - USDA LOANS:

You may also hear about USDA loans, which are backed by the United States Department of Agriculture mortgage program. USDA loans are intended to support homeowners who purchase homes in rural and some suburban areas. USDA loans do not require a down payment and may offer lower interest rates; borrowers may have to pay a small mortgage insurance premium in order to offset the lender’s risk.

What’s a conventional loan? Understanding what it means to be conforming and non-conforming

Buyers who have a more established credit history and a larger down payment may prefer to apply for a conventional loan. These loans may offer a lower interest rate and only require the home buyer to purchase monthly mortgage insurance while the loan-to-value ratio is above a certain percentage, so a conventional loan borrower can typically save money in the long run.

Conventional loans are divided into two types: Conforming loans and non-conforming loans.

1 - CONFORMING LOANS:

Conforming loans are those that meet (or conform to) predetermined standards set by Fannie Mae and Freddie Mac — two government-sponsored institutions that buy and sell mortgages on the secondary market. By selling the loans to "Fannie and Freddie," lenders can free up their capital and return to issue more mortgages than if they had to personally back every loan that they approve.

The main standard for conforming loans is that the amount borrowed must be under a certain amount; in Alaska, a single-family home loan must be under $647,200 in order to be considered conforming.

Properties with more than one unit have higher limits.

2 - NON-CONFORMING (JUMBO) LOANS:

But what happens if a borrower wants to borrow more than the Freddie- and Fannie-approved loan amount? In this case, they would have to apply for a “jumbo loan,” which is the most common type of non-conforming loan.

Because the lender cannot resell the jumbo loan (or any non-conforming loan) to Freddie Mac or Fannie Mae, jumbo loans are considered to be riskier than a conforming loan. To protect against this risk, the bank will typically require a higher down payment; the interest rate on a jumbo loan may also be higher than if the same borrower applied for a conforming loan.

What kind of rate should you choose?

Rate types: Fixed-rate vs. adjustable-rate mortgages.

In addition to the loan type you choose, you’ll also have to determine if you want a fixed-rate mortgage or an adjustable-rate mortgage (ARM). A fixed-rate mortgage has an interest rate that does not change for the life of the loan, so it provides predictable monthly payments of principal and interest.

An adjustable-rate mortgage typically offers an initial introductory period with a low-interest rate. Once this period is over, the interest rate adjusts periodically, based on the market index. The initial interest rate on an ARM can sometimes be locked in for different periods, such as one, three, five, seven, or 10 years. Once the introductory period is over, the interest rate typically readjusts annually.

Office 1229 E. Pleasant Run Ste 224, DeSoto TX 75115

Call :(713) 505-2280

Site: www.stevenjthomas.com

Owned and Operated by Thomas & Thomas Financial Group, LLC