Buying a New Construction Home in Charlotte: Builder Incentives, Financing and What to Check
Buying a new construction home around Charlotte usually means signing the builder's own contract, choosing between the builder's preferred lender and outside financing, and planning around a completion date that can move. Builder incentives can be valuable, but the best way to judge them is to compare the full financing package—not just the headline incentive or advertised rate.
Before moving into mortgages, I worked as an on-site new-construction sales agent for homebuilders, and before that as a Realtor. I've sat on the builder's side of the desk and now help buyers evaluate the financing side.
I'm Paul Mattos, a mortgage broker with Refine Mortgage, licensed in North Carolina and South Carolina. This guide covers what I'd want a buyer to understand before signing a contract on a new construction home around Charlotte.
How Is Buying New Construction Different From Buying a Resale Home?
A new construction purchase has several moving parts you may not encounter with a typical resale home.
The Builder's Contract
Builders typically use their own purchase agreements rather than the standard resale contract commonly used in the local market.
Pay particular attention to:
Deposits
Estimated completion dates
Financing deadlines
Change orders
Upgrade costs
Appraisal provisions
Cancellation rights
Rate-lock responsibilities
What happens if construction is delayed
Your real estate agent can help you understand the transaction, and you may want an attorney to review the contract if you have legal questions.
Builder Deposits
Builders often require an initial deposit, and additional deposits may be required for lot premiums, structural options or design-center upgrades.
Depending on the contract, some or all of those funds may become non-refundable.
Understand exactly what you are committing before paying for upgrades or signing the purchase agreement.
The Completion Date Can Move
A to-be-built home can take months to complete, and estimated closing dates can change.
Weather, inspections, labor, materials, utility connections and other construction issues can affect the schedule.
That matters if you are coordinating:
A lease expiration
The sale of another home
A relocation
A mortgage rate lock
Movers
Temporary housing
A school or job transition
Treat an estimated completion date as an estimate until the builder is much closer to delivering the home.
The On-Site Sales Agent Represents the Builder
The sales representative in the model home works for the builder.
You can generally have your own real estate representation, but builders may have rules about when your agent must be registered with you.
If you want your own agent involved, it is a good idea to discuss that before your first visit to the community.
How Do Builder Incentives Work?
Builder incentives are one of the biggest reasons buyers consider using a builder's preferred or affiliated mortgage company.
Depending on the builder, community and current promotion, incentives may include:
Closing-cost credits
Temporary rate buydowns
Permanent rate buydowns
Design-center credits
Upgrades
Appliance packages
Other permitted concessions
Many financial incentives are tied to using the builder's preferred or affiliated lender, and some offers may involve other affiliated service providers.
The incentive can be valuable. The important question is what the entire transaction looks like after the incentive is included.
Do You Have to Use the Builder's Preferred Lender?
Generally, no.
A builder may offer a financial incentive for using an affiliated or preferred mortgage company. When applicable, federal rules also require disclosures concerning certain affiliated business arrangements.
That does not mean you should automatically reject the builder's lender.
Sometimes the builder's financing package is very competitive.
The better question is:
What am I getting for using the builder's lender, and how does the complete offer compare with my other financing options?
That is a numbers question.
How to Compare a Builder's Mortgage Incentive
Do not compare the builder's incentive by itself.
Try to compare the builder's lender and an outside mortgage option using the same:
Purchase price
Loan amount
Loan program
Down payment
Rate-lock period or lock status
Property
Timing
Then compare:
Interest rate
Discount points
Origination charges
Lender credits
Builder credits
Mortgage insurance
Estimated property taxes
Homeowners insurance
HOA dues
Monthly payment
Estimated cash to close
Sometimes the builder's incentive makes its financing the better overall option.
Sometimes outside financing can still compare favorably even after accounting for the builder incentive.
You will not know from the incentive amount alone.
My guide to how seller credits can help lower your mortgage payment explains several ways credits can affect a purchase.
Are There Limits on Builder and Seller Credits?
Yes.
Mortgage programs have rules governing how much an interested party such as a seller or builder can contribute toward a buyer's eligible costs.
For conventional financing on a principal residence or second home, Fannie Mae's maximum financing concessions generally depend on the loan-to-value ratio. The limits are 3% when the LTV is greater than 90%, 6% from 75.01% through 90%, and 9% at 75% or below. Different rules apply to investment properties and certain other transactions.
FHA generally permits interested-party contributions of up to 6% of the sales price toward eligible costs.
VA treats seller concessions differently. Certain concessions are generally limited to 4% of the home's reasonable value, while ordinary closing costs and some other permitted seller-paid items are treated separately under VA rules.
The exact amount you can use depends on the loan program, transaction and eligible costs. A large advertised builder incentive does not necessarily mean every dollar can be applied however you want.
That is something to work through before choosing a loan structure.
Temporary vs. Permanent Rate Buydowns
Builders frequently advertise rate buydowns, but not all buydowns work the same way.
Temporary Buydowns
A temporary buydown uses funds contributed upfront to reduce the borrower's effective payment during an initial period.
For example, a 2-1 buydown typically provides a larger payment reduction during the first year, a smaller reduction during the second year, and then the borrower makes the payment based on the full note rate afterward.
For programs that require qualification at the full note rate, the temporary reduction does not increase your qualifying power.
The important thing is to look at the payment after the temporary buydown ends—not just the first-year payment featured in an advertisement.
Permanent Rate Buydowns
A permanent buydown uses discount points or other permitted funds to obtain a lower note rate for the loan.
That can reduce the payment for as long as you keep that mortgage, but there is an upfront cost associated with obtaining the lower rate.
Whether paying for a permanent buydown makes sense depends partly on how long you expect to keep the mortgage and how much the lower rate costs.
Neither structure is automatically better.
Ask to see both when they are available and compare the upfront cost with the potential benefit.
How Do Rate Locks Work on New Construction?
Rate locks can become more complicated when your home will not be finished for several months.
A standard short-term rate lock may not reach the expected closing date.
Depending on the lender and builder, your choices might include:
An extended rate lock
Floating the rate until construction is closer to completion
A builder-sponsored extended lock
A forward commitment or other builder financing arrangement
An extended lock can provide protection if market rates rise during construction, but longer locks can carry additional costs or different pricing.
Floating keeps your options open but leaves you exposed to market changes.
There is another question buyers sometimes overlook:
What happens if the builder delays completion beyond the rate-lock expiration?
Before choosing an extended lock, understand the extension policy, potential costs and who is responsible for those costs if construction is delayed.
Property Taxes on New Construction Can Be Misleading
This catches buyers regularly.
The current property-tax record for a new construction home may reflect only the land or an incomplete improvement because the finished home has not yet been fully assessed.
That can make the current tax bill look much lower than the taxes you may ultimately pay after the completed property is assessed.
Your mortgage estimate should use a reasonable projected tax amount for the completed home rather than blindly using the current land-only bill.
In North Carolina, the property may be subject to county taxes and, when applicable, municipal taxes.
South Carolina calculates property taxes differently. A qualifying owner-occupied primary residence may receive the state's 4% assessment ratio, but homeowners generally need to apply for the applicable legal-residence treatment.
My guide to North Carolina vs. South Carolina property taxes explains the differences in more detail.
HOA Dues and New Construction Communities
Many new developments around Charlotte have homeowners associations.
Depending on the community and property type, HOA dues may help pay for:
Common-area maintenance
Landscaping
Pools
Clubhouses
Trails
Private roads
Community amenities
Exterior maintenance on certain townhomes or condos
Before signing, find out:
What the current HOA dues are
What the dues include
Whether there is a one-time capital contribution or transfer fee
Whether there are multiple associations
What restrictions apply to rentals, fences, parking or exterior changes
Whether additional community fees apply
HOA dues also generally count toward your housing expense when qualifying for the mortgage.
A lower purchase price does not necessarily mean a lower total monthly housing expense if the property carries substantially higher association dues.
What Happens When the Builder Turns Over the HOA?
This is worth asking about in a newer community.
During development, the builder may control the homeowners association. Eventually, control may transition to the homeowners according to the governing documents and applicable law.
Ask for the HOA documents and current budget so you can understand how the association is being funded and what responsibilities will eventually belong to homeowners.
Do not assume today's HOA dues are guaranteed to remain unchanged.
Appraisals, Lot Premiums and Upgrades
New construction buyers can spend substantial amounts on:
Premium lots
Structural changes
Flooring
Cabinets
Countertops
Outdoor living spaces
Electrical upgrades
Design-center options
Those upgrades may make the home more valuable to you, but an appraiser does not necessarily assign a dollar of market value for every dollar you spend.
The appraisal is based on the property's market value and comparable sales.
A heavily upgraded home or unusually expensive lot can create an appraisal issue if comparable sales do not support the contract price.
Before committing significant cash to upgrades, understand what happens under your builder contract if the appraisal comes in below the purchase price.
Should You Get an Inspection on a Brand-New Home?
A new home can still have construction issues.
Many buyers choose to hire an independent home inspector even though the property is new.
Depending on the construction stage and builder rules, inspections might include:
A pre-drywall inspection
A final inspection before closing
A follow-up inspection before certain warranty periods expire
A mortgage appraisal and a home inspection serve different purposes.
The appraisal is primarily about property value and applicable mortgage requirements. An independent inspection is intended to evaluate the home's condition.
What About the Builder Warranty?
Do not assume every new-home warranty works the same way.
Coverage, exclusions, claim procedures and warranty periods vary by builder and warranty provider.
Before closing, ask:
What is covered?
How long does each type of coverage last?
What is excluded?
How do I submit a warranty request?
Who handles warranty work after closing?
Are there deadlines for reporting issues?
Keep copies of your warranty documents after closing.
Mortgage Options for New Construction Homes
If the builder owns the land, builds the home and sells the completed property to you, you can often use a standard purchase mortgage rather than obtaining your own construction loan.
Potential options include:
Conventional Loans
Conventional financing is common for new construction and includes low-down-payment options for qualified borrowers.
FHA Loans
FHA financing may be available when the borrower, property and transaction meet FHA requirements.
VA Loans
Eligible veterans, service members and certain surviving spouses may be able to use VA financing for an eligible new construction purchase.
USDA Loans
Some communities farther from Charlotte may fall within USDA-eligible areas.
USDA eligibility depends on both the property location and household eligibility, so check the actual address rather than assuming an entire town qualifies.
My guide to USDA-eligible areas near Charlotte explains how to check an address.
Jumbo Loans
Higher-priced new construction may require jumbo financing depending on the loan amount after your down payment and the applicable conforming loan limit.
My guide to conforming vs. jumbo loans explains the distinction.
Building on Your Own Land Is Different
If you own or are buying land and hiring a builder to construct your home, that is a different financing structure.
You may need a construction-to-permanent loan or another construction financing program rather than a standard new construction purchase mortgage.
My Specialized Home Loans page explains the distinction and some of the construction financing options that may be available.
Where Can You Find New Construction Around Charlotte?
Buyers considering new construction can find communities across the Charlotte metro and surrounding counties.
Areas buyers commonly explore include:
Indian Trail
Gastonia
Kannapolis
Do not compare communities based only on the advertised home price.
Property taxes, HOA dues, insurance, incentives, commute and the homes themselves can vary significantly from one community to another.
Common New Construction Mistakes to Avoid
1. Signing Before Getting Preapproved
Get the financing conversation started before committing to a builder contract and deposits.
A realistic budget should account for the projected taxes, insurance, HOA dues and other costs—not just the base price of the home.
2. Comparing Incentives Instead of the Complete Mortgage
A larger builder credit does not automatically produce the less expensive financing option.
Compare the complete package.
3. Using the Current Land-Only Tax Bill
Make sure your budget reflects a reasonable estimate of taxes after the completed home is assessed.
4. Forgetting About Lot Premiums and Upgrades
The base price advertised for a floor plan may be very different from your final contract price after the lot, structural options and design selections are added.
5. Spending Too Much on Upgrades Without Considering the Appraisal
An upgrade can be worth the money to you without adding the same amount to the appraised value.
Understand your contract and cash requirements.
6. Planning Everything Around an Exact Completion Date
Leave room for construction delays when coordinating your lease, current home sale, movers and rate lock.
7. Making Major Financial Changes During Construction
A long construction period does not freeze your mortgage qualification.
Opening new debt, changing jobs, moving large amounts of money without documentation or making other major financial changes can affect the file before closing.
Talk with your mortgage professional before making significant financial changes.
Buying New Construction Before Selling Your Current Home
New construction is not only for first-time buyers.
Move-up and relocation buyers often sign a contract on a to-be-built home while they still own their current property.
The construction timeline can provide additional planning time, but you still need to think through:
Builder deposits
Qualification while owning the current home
When to list the current property
Whether sale proceeds are needed for the new purchase
Rate-lock timing
Temporary housing if the two transactions do not line up
Reserves and other applicable mortgage requirements
My guide to buying in Charlotte before selling your current home covers those strategies in more detail.
If you are moving into the area, my Moving to Charlotte mortgage guide is another good place to start.
How I Help New Construction Buyers
My background with homebuilders is one reason I enjoy working with new construction buyers.
I've worked on the sales side of new construction, so I understand why builders structure incentives the way they do and why deposits, completion dates, upgrades and financing deadlines matter.
Today, as a mortgage broker, I can compare loan options from multiple wholesale lenders.
If you receive a financing offer from the builder's preferred lender, I'm happy to put it next to an outside option and compare the numbers.
I typically look at:
Interest rate and points
Lender and builder credits
Mortgage insurance
Projected property taxes
Homeowners insurance
HOA dues
Estimated monthly payment
Estimated cash to close
Temporary or permanent buydowns
Rate-lock considerations
If the builder's financing offer comes out ahead, I'll tell you.
The goal is to help you understand the numbers before deciding—not to force every buyer into the same financing option.
You can also read feedback from past clients on my reviews page.
New Construction Mortgage FAQs
Can a Builder Make Me Use Its Preferred Lender?
A builder may offer incentives connected to its preferred or affiliated lender, but you generally retain the ability to shop for your mortgage.
Compare what you would give up by declining the builder's financing with what you may gain from another mortgage option.
When Should I Get Preapproved for New Construction?
Ideally, before signing the builder contract.
Getting the mortgage review started early helps you understand your budget, projected monthly housing expense and available financing before committing deposits.
Can I Lock My Rate While My Home Is Being Built?
Potentially.
Extended rate-lock options vary by lender, program and length of construction. Longer locks can involve additional costs or different pricing.
Compare the cost and protection of an extended lock with the risk of waiting until you are closer to completion.
What Happens if My Home Isn't Finished Before My Rate Lock Expires?
The answer depends on the lender's lock-extension policy and any agreement with the builder.
An extension may involve a cost, so ask about this before choosing a long-term rate lock.
Are Property Taxes Higher on a New Construction Home?
The important issue is that the current tax bill may not reflect the completed home.
If the property was recently vacant land or under construction, the current tax record may be based on a much lower assessed value.
Budget using a reasonable estimate for the completed property.
Should I Use the Builder's Lender Just to Get the Incentive?
Not automatically—but do not automatically reject it either.
Compare the builder's complete mortgage offer with your outside financing alternatives.
The builder incentive may make its lender the stronger option, or another financing structure may make more sense after everything is compared.
Want Me to Compare a Builder's Mortgage Offer?
If you're considering new construction in Charlotte or elsewhere in North Carolina or South Carolina, send me the builder's incentive sheet or mortgage proposal and I'll help you understand what is actually being offered.
If you already have a Loan Estimate from the builder's lender, even better. We can compare the rate, points, credits, fees, payment and estimated cash to close with other available options.
Schedule a mortgage consultation if you want to talk through the purchase first.
If you're ready for a full preapproval review, you can also start your mortgage application.
Paul Mattos
Mortgage Broker | Refine Mortgage
Carolina Home Financing
NMLS# 2339069
Licensed in North Carolina and South Carolina
Call or text: 980-221-4959
Email: paulm@refinemortgage.net
Refine Mortgage Inc. | NMLS# 2417960 | Equal Housing Lender
This article provides general educational information and is not a commitment to lend, a rate quote, an offer of specific credit terms or legal advice. Mortgage programs, contribution limits, guidelines, pricing and lender requirements can change. Qualification depends on the borrower, property, selected loan program and underwriting approval. Builder incentives and financing offers vary by builder, community and transaction. Not all applicants will qualify.
