Your Complete Guide to Home Financing

Buying a new home is exciting, but the financing process can feel overwhelming, especially because most builders don’t offer in-house loans.  Many builders, instead, work closely with a preferred lending partner to help you get the best rates, smoother processing, and loan options that fit your situation.

This guide will walk you through:

• How builder–lender partnerships work
• The main types of home loans (conventional, FHA, VA, USDA)
• Down payment requirements
• Who backs each loan type and what that means for you
• How to choose the mortgage that’s right for your financial goals

1. Why Builders Use Preferred Lenders

Most builders choose not to handle financing directly. Instead, they form relationships with trusted lenders who specialize in new construction loans.

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Benefits for you as a buyer:

• Streamlined Process: Your lender is already familiar with the builder’s timelines and requirements.
• Special Incentives: You may qualify for closing cost assistance or interest rate buydowns.
• Expertise in New Construction: Preferred lenders know how to work hand-in-hand with your builder, perfecting their process from your first application to closing on your home.

💡 Tip: You are not required to use the preferred lender, but many buyers find the incentives and smoother experience worth it.

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2. The Four Main Types of Mortgages

Loan Type	Backed By	Minimum Down Payment	Who It’s For	Key Benefits
Conventional	Fannie Mae & Freddie Mac	3% – 5%	Buyers with good credit	Lower PMI, flexible terms
FHA	Federal Housing Administration	3.5%	First-Time Buyers or lower credit scores	Easier qualification, low down payment
VA	U.S. Dept. of Veterans Affairs	0%	Eligible veterans, active duty, & surviving spouses	No PMI, competitive rates
USDA	U.S. Dept. of Agriculture	0%	Rural & eligible suburban buyers	No down payment, low rates

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3. Who Backs Your Loan – And Why It Matters

When you hear that a loan is “backed” by an agency, it means that the agency insures or guarantees the lender against loss. This backing:

• Lowers risk for the lender
• Makes it easier for you to qualify
• Can reduce interest rates and fees

4. Down Payment Requirements Explained

• Conventional: 3% – 5% for first-time buyers; 20% avoids PMI
• FHA: 3.5% (580+ credit score)
• VA: 0% (no PMI required)
• USDA: 0% (income and property location restrictions apply)

💡 Example: On a $300,000 home, a 3.5% down payment is $10,500, while a 20% down payment is $60,000.

5. How to Choose the Right Loan

Ask yourself:

• How much can I comfortably put down?
• Do I qualify for special programs (military, rural)?
• What’s my credit score?
• How long do I plan to stay in this home?

Your preferred lender will help you compare options, factoring in interest rates, PMI costs, and monthly payment differences.

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Final Thoughts

Partnering with your builder’s preferred lender can save you time, stress, and money.  You’ll still have the freedom to shop around, but you’ll benefit from a team that knows the ins and outs of your builder’s process.

Ready to explore your financing options?

Visit our Mortgage Center for an easy side-by-side view of mortgage types, rates, and requirements.

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