Mortgages and New Construction: What Most Buyers Get Wrong

Buying a new construction home works differently than buying an existing one, and most of the worry buyers carry into the process comes from things they've heard, not from how it actually works today. Here are four of the biggest questions buyers ask, and the real answers, plus a checklist to keep you on track.

No. This is one of the most common myths out there, and it stops a lot of buyers before they even start looking.

20% down was never a hard requirement, it's just the amount that lets you skip mortgage insurance on a conventional loan. Plenty of loan programs allow much less down, and some buyers qualify for programs that require little to no money down at all, especially when a builder is working with a lender who offers down payment assistance.

Right now, for example, Home Creations Houston has low and no-down-payment options available through its participating lender on qualifying homes. Programs like this vary buyer to buyer based on things like credit score and household income, so the real answer to "how much do I need down" is: ask what you personally qualify for before assuming you need 20%.

It's a fair question, but waiting comes with its own cost.

Rates move up and down, and nobody can predict exactly when they'll drop or by how much. What's easy to overlook is that home prices historically don't wait around for rates to improve, they tend to keep climbing. So "waiting for a better rate" often means paying more for the home itself later, even if the rate is a little lower.

There's also a tool a lot of buyers don't know about: a temporary rate buydown. This lowers your interest rate for the first year or two of your loan, which lowers your monthly payment while rates are elevated. Builders who partner with a preferred lender can often offer buydowns like this, which is one way to buy now at a lower payment without waiting on the broader rate market to shift. Ask what's currently available and what it would mean for your specific payment.

They can be, but they don't have to catch you off guard, and in a lot of cases they don't have to come out of your pocket at all.

Closing costs are the fees involved in finalizing your loan and your home purchase, things like loan origination fees, title work, appraisal fees, and prepaid items like the first year of homeowners insurance. On a resale home, buyers typically pay these themselves or negotiate for the seller to cover part of them. With new construction, builders working with a preferred lender can sometimes cover some or all of these costs as part of a current promotion. For instance, Home Creations' current incentive pays all closing costs for you, so it's one less obstacle to homeownership.

The best move is to ask your builder and lender for a full breakdown of expected closing costs early, and to ask directly whether any current incentive covers part or all of them.

You're never required to use the builder's lender, but it's worth understanding what you'd be comparing against before deciding.

A lender who works closely with a builder can offer things an outside bank often can't, like rate locks that match your build timeline, or incentives tied specifically to that builder, like covered closing costs or free appliances. Shopping outside lenders is smart, just make sure you're comparing the whole offer (rate, closing costs, down payment help, and any credits) and not only the interest rate by itself.

Do I need a lot of money for a down payment on a new home? No, not necessarily. Many buyers assume they need a large down payment, often 20% or more, but that's not a requirement. Home Creations Houston works with a preferred lender offering low and no-down-payment programs on qualifying homes, so the amount you actually need depends on your credit and household income, not a fixed percentage.

Do I need a 20% down payment to buy a new construction home? No. 20% down is only what's required to avoid mortgage insurance on a conventional loan. Many buyers qualify for loans and assistance programs requiring far less, sometimes little to no money down.

Should I wait to buy until interest rates go down? Not necessarily. Home prices tend to rise even when rates are high, so waiting can mean paying more overall. Temporary rate buydowns can also lower your payment now without waiting on rates to shift.

What are closing costs, and will I have to pay them myself? Closing costs are the fees involved in finalizing your loan and home purchase, including things like loan fees, title work, and prepaid insurance. On new construction, builders working with a preferred lender sometimes cover some or all of these costs as part of a current promotion. Home Creations' current incentive, for example, covers all closing costs, so it's worth asking what's available before assuming you'll pay these out of pocket.

Do I have to use the builder's lender? No. You can use any lender you qualify with. Builder-affiliated lenders often offer savings and flexibility outside lenders can't match, but it's always worth comparing the full offer.