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    Buyer Guide

    How to Finance a New Construction Home

    Two loan paths, two very different processes. Here's how to pick the right one, what down payment to expect, and whether to take the builder's preferred lender deal.

    Written and reviewed by Carla Goddard, Founder & CEO, Vicinity. Last reviewed September 12, 2026.

    Financing a new construction home isn't necessarily harder than financing an existing home. But the timing can be different. With a resale, you generally know what you're buying, the property already exists, and the path from contract to closing is relatively defined. With new construction, the home may not be finished yet. You may be making selections while it's being built. The final price may change as you add options. And the mortgage process may happen months before you actually get the keys. That's why financing should be part of your new-construction plan from the beginning, not something you figure out after you've chosen the house.

    Start With What You Can Comfortably Afford

    Before looking at floor plans, builder incentives or upgraded kitchens, establish your own budget. A lender can tell you how much you may qualify to borrow. That isn't necessarily the same amount you should spend. Your monthly housing cost may include more than principal and interest. Depending on the property and loan, you may also have:

    • Property taxes
    • Homeowners insurance
    • Mortgage insurance
    • HOA dues
    • Special district assessments
    • Other community-related costs

    And new construction can bring expenses buyers don't always think about initially, including:

    • Lot premiums
    • Structural options
    • Design upgrades
    • Landscaping
    • Fencing
    • Window coverings
    • Appliances or other items not included in the base price

    The price on the builder's website is often the beginning of the conversation, not necessarily the number you'll finance.

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    Frequently Asked Questions

    How do you finance a new construction home?
    There are two paths. (1) Production builder financing: the builder owns the land and finishes the home before closing, so you use a standard 30-year purchase mortgage (conventional, FHA, VA, USDA), exactly like a resale. (2) Custom or on-your-lot construction: the home doesn't exist yet, so you need a construction-to-permanent loan (a single-close loan that funds the build, then converts to a 30-year mortgage at certificate of occupancy).
    What is a construction-to-permanent loan?
    A construction-to-permanent (C2P or 'single-close') loan funds your home in stages (foundation, framing, drywall, finish) while you pay interest-only on the drawn balance during construction, typically 6 to 12 months. When the certificate of occupancy is issued, the loan automatically converts to a standard 30-year mortgage at a rate locked at closing. One closing, one set of fees, one credit check.
    How much do you put down on a new construction home?
    On a production builder home: as little as 0% (VA, USDA), 3.5% (FHA), or 3 - 5% (conventional). On a construction-to-permanent loan: most lenders require 10 - 25% down on the total project cost (land + build). Builders also collect a non-refundable earnest money deposit at contract, typically 1 - 10% of the purchase price, which is much higher than the $1K to $5K typical on resale.
    Should I use the builder's preferred lender?
    Only if the closing-cost credit beats an outside lender's 5-year total cost. Builders offer $5K to $20K in closing credits when you finance in-house, but the rate is often 0.25% - 0.75% higher. Get a Loan Estimate from both within 24 hours, then compare APR and total cost over 5 years, not just the rate or the credit. Over 30 years, a higher rate almost always outweighs a one-time credit.
    When do you lock your rate on a new construction home?
    Standard rate locks last 30 - 90 days, but new construction can take 6 - 12 months to finish. Most builder lenders offer extended locks (180 - 360 days) for a fee (0.25% - 1% of the loan amount), or a float-down option that lets you re-lock once if rates drop. If your build is more than 90 days out, ask for an extended lock in writing in your contract, verbal commitments evaporate.
    What credit score do you need for a new construction loan?
    Production-builder mortgages follow standard guidelines: 580+ for FHA, 620+ for conventional, 620+ for VA (most lender overlays). Construction-to-permanent loans are stricter, most lenders want 680+, sometimes 700+, plus 6 - 12 months of cash reserves. Custom builders also pull credit before accepting your lot deposit, so don't open new accounts or finance furniture between contract and closing.

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