There are two main ways a new home is financed:
· The builder carries the construction costs until the home is completed
· The buyer obtains a construction loan and pays the builder for work completed at several points during the construction process

Builder financing is common in large developments where there is a single exclusive builder; where the new home is for a first-time homebuyer; or where the builder is a large national or regional builder.

Buyer financing is typically used to finance construction when the buyer owns their lot; when the builder is local and is not exclusively building in a given development; where the buyer is building a log, cedar, panelized or modular home; and when the buyer is performing some of the work, such as paint and trim work.

Builder Financing Characteristics:
· The buyer does not take title to the property until the home is completed
· The buyer has no obligation to make any payments until the home is completed
· The builder includes the cost of financing construction into the home price

Buyer Construction Financing Characteristics:
· The buyer takes title to the land immediately.
· The buyer may make interest payments on loan advances during construction (though there are a few innovative lenders that do not require this… shop around!)
· The buyer may be able to negotiate a better price with the builder because the builder will not have to carry the cost of financing in his bid.