If you’re interested in buying a newly built home in a development or building a custom home from the ground up, talk with us to learn more about your construction financing options.
What makes buying a newly built home different from buying an existing home?
- Options and upgrades. Homes can be customized with options — from floor plans and paint colors to faucets and light fixtures. You might also be able to modify rooms and layouts or include walk-in closets, whirlpool baths, and custom appliances. Use our home wish checklist (PDF)* to identify which features are important to you.
- Potential builder incentives. Some builders try to encourage sales by offering to pay closing costs, points, or by providing special interest rate incentives.
- A longer wait. Newly built homes typically have lengthier time spans between contract signing and moving day for a variety of reasons.
- Additional construction documentation. Custom building projects typically require construction project and builder validation, inspection reports prior to payments to the builder, and verifications prior to your final loan preparation.
What are the benefits of building a home or buying a newly built home or condominium?
New homes may offer many advantages:
- More space. Newly built homes are typically larger than existing homes and offer more closet, garage, and storage space. New homes are also thoughtfully laid out with efficient space planning designed for today’s lifestyles.
- Improved safety. Today's new homes have hard-wired smoke detectors and alarm systems with battery-powered backup.
- Energy efficiency. Improved heating and cooling systems and better insulation techniques offer efficiencies.
- Health considerations. New construction materials are free from asbestos, lead, and formaldehyde emissions. New radon control systems are also available.
How can I lock my interest rate range while my new home is under construction?
Our Builder Best® Extended Rate Lock program provides rate-lock options that protect against interest rate changes while your home is being built, regardless of market fluctuations. The rate-lock option requires a non-refundable extended lock fee.
- Available on government conventional conforming and non-conforming, fixed- and adjustable-rate loans.
- Lock in interest rates for:
- From 5 months up to 12 months on conforming government and conventional loans.
- From 5 months up to 24 months on jumbo mortgages.
- If the overall interest rate increases, your interest rate remains protected through your rate-lock period.
- If the overall interest rates decrease, you may seek to exercise the one-time float down to the current rate.
- Within 60 days of closing, you can switch to another eligible product, subject to credit approval.
- Expect to have your loan reviewed again if changes are made (such as changing to another eligible product).
How can I finance home construction, including buying a building lot, home plans, and construction?
Custom-Home Construction Financing gives you the convenience of two separate loans: one to finance the construction of your home, and one to act as a permanent loan when the building process is completed.
- Construction loan financing for up to 12 months with the ability to convert to a permanent loan
- Available to eligible Wells Fargo customers
- Enjoy the convenience of one application for your construction funds, as well as your permanent mortgage financing
- Ability to combine with the Builder Best® Program for additional benefits
- Requires an existing or new qualified Wells Fargo relationship
- May not be available in all areas
What types of single-family homes can I finance?
Newly built homes
Nearly move-in ready and located in a new development or on a builder’s lot, these homes typically come with limited warranties on the house and appliances.
Newly built homes offer features that are not typically available in existing homes, including:
- Energy efficiency from improved heating and cooling systems
- A variety of home styles and floor plans
- Options for cabinets, appliances, and lighting
Download our free guide (PDF)* for details on buying and financing newly built homes.
Typically built from scratch by collaborating with an architect and a builder, these homes enable you to design a home to your specifications.
While custom homes offer the opportunity to create a home optimized to your lifestyle needs and tastes, these projects can require additional consideration:
- Depending on your builder or the type of financing you obtain, you may be required to make advance deposits.
- A builder might require that you purchase the lot and secure your construction financing before any work begins.
Partial custom homes
These homes allow limited changes to floor plans and other features. Partial custom homes enable you to:
- Tailor your home to your lifestyle and individual taste with cabinet choices, room and tile colors, and finished basement options.
- Specify limited structural changes by increasing room sizes or overall size of the home.
- Add options and upgrades to the purchase price, which allows you to build the home you want and limit your out-of-pocket expenses.
Built and inspected in a factory environment, these homes provide a combination of quality, speedy construction, and lower cost.
- Quality. Designed to meet or exceed local building codes and virtually indistinguishable from traditional homes, they often allow owner customization.
- Speed. Factory built homes have shorter construction periods than site-built homes. The homes are usually up to 90 percent complete when shipped and typically take builders weeks to assemble.
- Cost. A modular home can save on costs. Projects are less likely to go over budget and lower costs can make modular homes more competitively priced.
What should I consider when selecting a builder?
- Verify licenses. Depending on local guidelines, you may need a licensed contractor for the house to pass required inspections.
- Check references. Talk to people with homes built by the same builder. If there’s a homeowners association, get minutes from recent meetings to look for complaints about the builder's work. Also contact your local home builders association to see if they’re a member in good standing.
- Inspect work. Ask to view homes the builder completed and visit a construction site. Make sure the builder is comfortable creating the type of home you like.
- Consider compatibility. You should feel comfortable asking questions, talking about your ideas, and working closely with your builder.
What are the benefits of condo ownership?
- Condominiums exist in a variety of styles, locations, and prices.
- They may provide ownership opportunities for first-time homebuyers.
- Usually a homeowner association is responsible to maintain the building exterior, grounds, and common areas.
- Some condos provide convenient vacation getaways; others combine the opportunity for homeownership with the convenience of urban living.
What types of condos does Wells Fargo finance?
- Established condo projects. Construction is finished and the condo is under the control of a homeowners association.
- New construction. These condo projects are under the control of the developer because the units are still considered under construction.
- Conversions. Originally designed for use as something other than a condominium, such as an apartment building or a hotel, these condos are renovated for residential ownership.
- Resort condos. These communities are located in a vacation destination and primarily used as second homes.
What should I consider when purchasing a condo?
- Monthly fees. Homeowners association dues provide the funds to insure and maintain the common elements.
- Insurance coverage. A shared insurance policy, known as a master policy, covers the building’s common elements. You may be required to purchase insurance for the interior of your unit to cover the replacement of fixtures.
- Resale restrictions. Determine any limitations on your ability to sell your unit.
- Association rules. Set by the homeowners association, these requirements govern what you are allowed to do with the exterior of your condo unit in order to keep up the project’s appearance. For example, the rules may prohibit satellite dishes. The use of common elements may be governed by rules, for example parking spaces may be assigned.
- Project approval. Even if you’re not applying for government financing, finding out whether a condo is approved by housing agencies such as the FHA and VA can help with resale by ensuring that future buyers can obtain this financing. It also indicates that the community is performing to certain standards set by government housing agencies. If you’re thinking of buying a condo and want to find out if the project is approved, ask your home mortgage consultant to submit information about the project for review.
What is the process for financing a newly built home?
Generally, there are six steps for financing a new home from a builder or developer.
- Initial stage. Now’s the time to discuss your financing. You can start by getting prequalified, which provides a rough idea of how much you may be able to borrow based on basic financial data you provide. You can also request a preapproval letter, which tells the builder you’re preapproved for a specific loan amount based on a preliminary credit review.
- Application. When you're ready to sign a purchase contract, we'll help you complete your mortgage application and provide options to protect your loan from interest rates changes during construction. Consult our application checklist (PDF)* for items you may need when applying.
- Approvals. We'll work with you during the loan approval process so you can enjoy seeing your home being built.
- Exercise rate-drop options. During construction, extended lock programs may help protect against interest-rate fluctuations. A non-refundable extended rate-lock fee is required. If interest rates decline, you can exercise a one-time option to obtain new loan pricing, subject to approval. We'll remain in touch to discuss your choices and answer questions.
- Completion of construction. In many counties, a final inspection determines that everything is ready so that you or your builder can get a Certificate of Occupancy (or its equivalent) from your local authorities.
- Move in. Your construction and financing are now complete. Congratulations and best wishes on your new home.
What is the process for financing the construction of my home from plans?
There are generally seven steps for financing using Custom-Home Construction Financing.
- Initial stage. Even if you don't have much finalized, it’s a good time to arrange financing. Now’s the time to discuss your financing. You can start by getting prequalified, which provides a rough idea of how much you may be able to borrow based on basic financial data you provide. You can also request a preapproval letter, which tells the builder you’re preapproved for a specific loan amount based on a preliminary credit review.
- Application. Your plans are probably starting to solidify. You may have selected a builder and are ready to apply for a mortgage. See our application checklist (PDF)* for items you'll need when applying.
- Approvals. We'll work with you to get your permanent loan approved. We'll also get the final plans and specs so we can order an appraisal. After we have the appraisal and a fully executed purchase contract, we'll submit the entire package for construction loan approval.
- Construction closing. Following the necessary approvals, we'll close on the loan that finances your home’s construction. A settlement agent will give you instructions about the amount you'll need to bring to closing. As soon as you close on the final construction loan, you can begin building.
- Draw process. During construction, you and your builder will request payment draws from the construction fund for completed work.
- Completed construction. In many counties, a final inspection will determine that your home is finished. Then you'll need a Certificate of Occupancy (or its equivalent) from your local authorities. We'll begin working with you to transition into your permanent loan product and schedule a modification of the construction loan to the permanent mortgage.
- Move in. Your construction and financing are complete. Congratulations and best wishes on your new home.