Buying a new build in Texas works a lot like buying a resale home, with a few extra moving parts: a builder's contract, a builder's preferred lender and its incentives, completion paperwork before you can close, and property taxes that often start low and jump later. You're free to use any lender you want, even if the builder has a preferred lender. The smart move is to get a Loan Estimate from the builder's lender and one from an independent lender, compare them line by line, and make sure whatever incentive you choose is written into the contract and fits your loan program's limits.
Spec home, to-be-built, or build on your own lot?
- Finished or nearly finished spec home. The builder already built it with its own money. You buy it with a regular purchase mortgage.
- To-be-built in a builder's community. You sign a contract now, and the builder finishes the house before you close. You still use a regular purchase mortgage, but the timeline is months, not weeks, which matters for your rate lock.
- Your own lot with your own builder. That's a construction loan, not a new-construction purchase. See construction loans.
The builder's preferred lender
Most DFW builders have a preferred or affiliated mortgage company, and many offer incentives, like closing cost help or a rate buydown, if you use it. Here's what federal rules say:
- A package or discount for using the builder's lender isn't illegal "required use," but it has to be optional, it has to be a true discount below otherwise available prices, and it can't be made up with higher costs somewhere else (12 CFR 1024.2, "required use").
- If the builder owns part of the mortgage company or title company it refers you to, you're supposed to get an affiliated business arrangement disclosure explaining that relationship, and generally you can't be required to use that affiliate (12 CFR 1024.15).
- Every lender has to give you a Loan Estimate within three business days of your application, in the same format, so you can compare them side by side (12 CFR 1026.19(e)).
When you compare, look at the whole picture: the incentive amount, what it's paying for, the lender's fees, the cash to close, and the loan terms. An incentive that only exists if you pay more somewhere else isn't really an incentive. And sometimes the builder's offer is the better deal. The point is to know.
Incentives have limits: the program caps
A builder is an "interested party," so builder-paid closing costs, prepaids, discount points and buydowns count toward your loan program's limit on seller and builder contributions:
- FHA: up to 6 percent of the sales price, and that 6 percent includes builder-paid permanent and temporary buydowns and the upfront mortgage insurance premium. Anything over that, or more than your actual costs, is treated as an inducement to purchase and reduces the amount you can borrow (HUD 4000.1 II.A.4.d.iii(G)).
- Conventional (Fannie Mae): 3 percent when the combined loan-to-value is above 90 percent, 6 percent when it is above 75 up to 90 percent, 9 percent when it is 75 percent or less, and 2 percent on an investment property, based on the lower of the price or appraised value (Selling Guide B3-4.1-02).
- VA: seller concessions are limited to 4 percent, and normal closing costs and discount points don't count toward it (VA closing costs and fees).
- USDA: the seller or other interested party can't contribute more than 6 percent of the sales price toward your financing costs, closing costs, escrows, furniture or other giveaways (7 CFR 3555.102(h)).
Builder incentives also can't be used for your minimum down payment on FHA. If the builder is paying for a temporary buydown, it's part of these limits too. See temporary buydowns and seller concessions.
Completion paperwork before you close
A lender can't close on a house that isn't finished. For FHA, a home that's never been lived in and was completed less than a year ago is "new construction," and the lender needs (HUD 4000.1 II.A.8.i):
- Proof of completion: a certificate of occupancy or equivalent, or a final inspection. If the appraisal happens before construction starts, that means the permit and CO, or footing, framing and final inspections.
- Form HUD-92541, the builder's certification of plans, specifications and site, and form HUD-92544, the builder's warranty of completion.
- A builder's termite protection guarantee, and a well water test or septic report where they apply.
Other loan programs have their own completion requirements, but the idea is the same: the city's or inspector's sign-off and a homeowners insurance policy on a finished house have to be in hand before closing. A closing scheduled the same day the city does its final walk is a closing at risk.
The appraisal on a new home
New doesn't mean the appraisal automatically hits the contract price. For FHA, an appraisal in a new subdivision has to use at least one comparable sale from inside the subdivision and at least one from outside it (HUD 4000.1 II.A.8.i.vii(B)). Large incentives can also get a closer look, because concessions can affect how a sale compares to others. See how the appraisal works.
Texas notes
- Contracts. TREC has promulgated New Home Contract forms for incomplete construction (TREC No. 23-20) and completed construction (TREC No. 24-20). The completed-construction form includes an optional termination option paragraph. Many builders use their own contract instead, and it can read very differently, including how deposits, change orders, delays and inspections are handled. Read it before you sign, and have your agent or attorney walk you through it.
- Inspections. On the TREC completed-construction form, you can still have the house inspected by a TREC-licensed inspector even when you accept it "as is." Phase inspections during a build (pre-pour, pre-drywall, final) are worth asking about, even though the lender's required inspections are about code completion, not your peace of mind.
- MUD and PID taxes. Many new DFW subdivisions sit inside a municipal utility district or a public improvement district. Texas requires the seller to give you a statutory notice about a MUD (Tex. Water Code Sec. 49.452) or a PID assessment (Tex. Prop. Code Sec. 5.014). Those taxes and assessments go into your escrow and your debt-to-income ratio.
- The first-year tax trap. A new home's first tax bill is often based on the lot or a partly built house as of January 1. The next year's bill reflects the finished home. HUD requires FHA lenders to estimate new-construction taxes on land and improvements (HUD 4000.1 II.A.5.d.vii(B)(1)), and I estimate it that way on every loan, so your escrow doesn't come up short a year later. See Texas property taxes.
Timing your rate lock
A to-be-built home can take months. Standard locks are shorter than that, so timing matters. Some builders' lenders offer extended locks as an incentive, and extended locks from any lender may cost more. Ask any lender you compare how long the lock is, what happens if the builder runs late, and whether there's a float-down. See when to lock your rate.
Fictional example
This example is made up to show how the pieces fit.
Jordan is buying a to-be-built home in a new Crowley subdivision with an FHA loan. The builder offers a closing cost credit plus a temporary buydown if Jordan uses its lender. Jordan also gets a Loan Estimate from me. We check that the builder's credit plus the buydown stays within FHA's 6 percent cap, compare lender fees and cash to close on both estimates, and confirm the subdivision's MUD notice so the MUD tax is in the payment estimate. Jordan picks the option that's better overall and makes sure the chosen incentive is written into the builder's contract. A month before completion, the CO, HUD-92541 and HUD-92544 go into the file so closing isn't waiting on paperwork. Whether Jordan is approved still comes down to underwriting.
Common mistakes and myths
- "I have to use the builder's lender." You don't. You may give up a specific incentive, but the choice is yours.
- "New homes don't need an inspection." Builders make mistakes too. The lender's completion inspection is about code, not workmanship.
- "A builder warranty is homeowners insurance." It isn't. You still need a homeowners policy, and flood insurance if the home is in a flood zone.
- "My taxes will stay where the first bill was." First-year bills are often based on a partial value. Plan for the full value.
- "The incentive is in the text from the sales office, so it's real." If it isn't in the contract or a signed addendum, underwriting can't count it.
- "Any incentive amount works." Every program caps interested-party contributions, and buydowns count.
What to have ready
- The builder's contract and every addendum, including the incentive terms.
- The estimated completion date and the builder's lock offer, if any.
- MUD or PID notices and HOA information for the community.
- Your income, asset and credit documents, so both lenders quote on real numbers.
- A second Loan Estimate, from me or another independent lender.
Next step
Looking at a new build with a preferred-lender incentive? Send me the builder's offer and I'll give you a side-by-side Loan Estimate so you can see which deal is actually better. Schedule a call, or when you're ready, start an application.
Related questions
Sources
Links checked Oct 21, 2026.
- HUD Handbook 4000.1, II.A.4.d.iii(G) Interested Party Contributions, II.A.5.d.vii(B)(1) tax estimates, II.A.8.i New Construction (Update 17, issued Nov 26, 2025, the version in effect today; Update 18, issued Aug 12, 2026, may be adopted now and must be used by Nov 10, 2026, and does not change the rules cited here): https://www.hud.gov/sites/default/files/OCHCO/documents/40001-hsgh-Update-17.pdf
- Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions (Guide published Oct 7, 2026): https://selling-guide.fanniemae.com/sel/b3-4.1-02/interested-party-contributions-ipcs
- VA, Purchase and cash-out refinance loan fees and closing costs: https://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
- 7 CFR 3555.102(h), USDA seller concessions (eCFR, current): https://www.ecfr.gov/current/title-7/section-3555.102
- 12 CFR 1024.2 (definition of required use) and 1024.15 (affiliated business arrangements), Regulation X: https://www.consumerfinance.gov/rules-policy/regulations/1024/2/ and https://www.consumerfinance.gov/rules-policy/regulations/1024/15/
- 12 CFR 1026.19(e), Loan Estimate timing, Regulation Z: https://www.consumerfinance.gov/rules-policy/regulations/1026/19/
- TREC New Home Contract (Completed Construction), TREC No. 24-20 (form dated 05-04-2026), and New Home Contract (Incomplete Construction), TREC No. 23-20: https://www.trec.texas.gov/forms/new-home-contract-completed-construction-0 and https://www.trec.texas.gov/forms/new-home-contract-incomplete-construction-0
- Texas Water Code Sec. 49.452 (MUD purchaser notice): https://statutes.capitol.texas.gov/Docs/WA/htm/WA.49.htm
- Texas Property Code Sec. 5.014 (PID notice): https://statutes.capitol.texas.gov/Docs/PR/htm/PR.5.htm
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026