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There are several different loan programs and options available when purchasing a new home. The expected length of time you will live in the home is one of the most important factors to consider when choosing the type of loan to receive.
Some of the larger production builders, such as M/I Homes, Dominion Homes, and several others have their own financial divisions where they process loans for their new construction. Often their rates are slightly above market interest rates, but in some situations are able to get approval for clients who could not get approval at other financial institutions. Several building companies offer discounts off the purchase price of your new home if you use outside financing sources. In other words, many of the production builders have "money built-in their listed price for financing", thus they are able to reduce the purchase price if you choose to use an outside lending source. Some of the potential advantages in using a builder's financing include rate locks. In a lot of circumstances the builder will lock your interest rate until the time of closing. This creates a situation where you eliminated your risk if interest rates were to rise. Many outside lending institutions only offer rate locks for a certain amount of time - such as 180 days. While homes are frequently built in less than 180 days, sometimes there are delays in the construction of a home such as trouble obtaining building permits, getting inspections approved, and weather related delays.
Certain loan options, such as Third Federal Savings & Loan offer 240 day rate locks - which usually covers the duration of the construction process.
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