Financing a New Construction Home: What’s Different?

By Steven Thomas, Refind Realty

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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