New Construction Home Loans in North Carolina and South Carolina

When you buy from a builder, you sign a purchase contract and usually close with a regular mortgage once the home is finished. I can pre-approve you before you visit models, compare your options with the builder's preferred lender, and lock your rate when the timing makes sense. See buying a new construction home in Charlotte.

Many builders offer incentives such as closing cost credits, rate buydowns or upgrade credits when you use their preferred lender. Sometimes that's the best deal, and sometimes a lower rate or lower fees elsewhere is worth more than the incentive. Ask the builder for the incentive in writing, including whether it depends on the lender, then compare the full Loan Estimates side by side. See how seller credits can lower your payment.

A construction loan pays the builder in stages, called draws, as each phase is completed and inspected. During construction you may make interest-only payments on the amount drawn so far, depending on the program. When the home is finished, the loan converts to your permanent mortgage.

• One-time close: one application, one approval and one closing for the land, construction and permanent mortgage. Fewer closing costs and no requalifying at the end, but the program has more rules up front.

• Two-time close: a short-term construction loan, then a separate permanent mortgage when the home is done. More flexibility, but two closings and you'll need to qualify again at the end.

Construction financing may be available through conventional, FHA, VA and USDA programs, each with its own down payment, credit, builder and property requirements. Not every lender offers every program, which is one reason working with a broker helps. See USDA home loans, VA home loans, FHA home loans and conventional loans.

Some construction loans can include buying the lot. If you already own land, its value and any existing liens are reviewed, and in some programs your equity in the land may count toward the loan. Check septic, water, zoning and flood zones before you buy. See buying land to build on in South Carolina.

For a construction loan, the lender usually reviews and approves the builder, the build contract, plans, specs and budget before closing. Have these lined up early, since they're needed for the appraisal.

If your home won't be finished for several months, ask about extended rate locks: how long they last, what they cost, and whether you can float down if rates drop. Some builders and lenders cover part of the cost.

The appraiser values the home based on the plans, specs and comparable sales. If the appraisal comes in below the contract price, you may need to bring more cash, renegotiate or change the plans.

The loan is based on the original contract. Upgrades and change orders after that may need to be paid in cash or approved by the lender. See custom build budgets: allowances, change orders and upgrades.

An inventory home may close in weeks, while a custom build often takes about 15 to 18 months. Plan for rent or your current mortgage payment in the meantime. If you'll be selling your current home, see can I buy a house before selling mine. See also how long it takes to build a custom home in South Carolina.

New construction loans differ a lot between lenders: incentives, lock length and cost, draw schedules, builder requirements, down payment and which programs they offer at all. I compare the options available through my wholesale lenders alongside the builder's preferred-lender offer.