Let me start by saying that your accountant, lender, banker or mortgage broker is going to be the best resource for what type of loan program best fits your financial goals. All builders are not created equal in regards to what type of financing you can choose for building a new home.
Some builders may want to carry the loan during the building process. This type of scenario is considered an end loan. An end loan is just that, the home owner does not start paying until the end of the building process once the closing takes place. With this product the builder typically collects a larger up front deposit for collateral as they are getting the loan and taking the financial risk to build the home. Typically, builder's base pricing takes interest carry cost into consideration.
Some smaller semi custom/ custom/ design home builders will give you options on what type of loan the home owner can do during the building process. Typically, the smaller semi custom/ custom/ design builders will prefer the home owners to get a construction loan. With a construction loan the home owner closes on the property/ home site/ lot and building specifications with their lender prior to the start of construction. During the construction process the lender releases funds to the builder as each phase of constructions is complete. The home owner will then pay the interest of the portions of the loan being used throughout the construction process. With this type of loan the builder will typically give you a reduced price off the base price if they are factoring in interest carry cost into the base price.
Construction loans benefit the customer in many ways. One, they get to take advantage of the tax deduction generated by the interest paid on the loan. Two, the home owner receives a reduction off the base price if the builder factors in interest carry cost. Three, the builder will require less upfront deposit as the closing takes place right away so your deposit is more protected by the bank. Four, the home owner officially owns the home site, plan and specifications so if anything happens to the builder the home owner/ home owner's bank still owns the property and the lender can find a new builder to finish the project. By hiring Team Freeman as your buyer's agent he will help you find the right lender for a construction loan.
For more information on end loans vs. constructions loans please talk with a lender, banker, mortgage broker, accountant or financial advisor.
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