Eyeing a to‑be‑built home in Houston but unsure how the financing really works? You are not alone. With so much new construction across Greater Houston, many buyers face presale contracts, staged deposits, and timelines that feel unfamiliar. In this guide, you will learn the loan paths available, what builders and lenders expect, and how to avoid common pitfalls that can delay closing. Let’s dive in.
Why presales are common in Houston
Buying new construction is a normal path in our market. Local coverage highlights how affordability and inventory have fueled strong new‑home activity across Greater Houston, especially in fast‑growing communities. You will likely see builder incentives, a wide price range, and different timelines by neighborhood. For context on recent activity and pricing ranges, review recent market insights from the Houston Association of REALTORS and monthly new‑construction snapshots for the region (HAR market insights, HoustonIcon monthly data).
How presale financing works
Financing a to‑be‑built home usually follows one of a few paths. Your choice depends on whether you fund construction, wait until completion, or use a builder program.
End loan on a completed home
If you buy after the home is finished, you use a standard mortgage at closing. The lender will require proof of completion, final title work that clears construction liens, and typically a Certificate of Occupancy before funding.
Construction‑to‑permanent loans
C2P financing can be single‑close or two‑close. With a single‑close, you close once, the loan funds construction draws, then it converts to a permanent mortgage when the home is complete. With a two‑close, you take an interim construction loan and later close on a separate permanent mortgage. Fannie Mae outlines how these structures work, including documentation, construction period limits, and lien requirements (Fannie Mae C2P overview).
FHA One‑Time Close
FHA insures a one‑time close that can combine land, construction, and permanent financing in a single case number. You must meet FHA eligibility, appraisal, contractor, and inspection rules, and loan limits apply by county. Review current program guidance and limits before you commit (FHA single‑family program info).
VA construction financing
VA allows one‑time or two‑close construction structures, though not all lenders offer them. VA requires builder registration, inspections, and an appraisal based on the as‑completed home. Veterans benefit from program protections if value comes in below the contract price, so ensure your contract and lender follow VA guidance (VA Construction & Valuation).
Builder incentives and deposits
Many builders offer incentives like closing cost credits or temporary rate buydowns. Some promotions feature reduced deposits, especially on quick‑move‑in homes. Always read the contract to see which deposits are refundable and what option or upgrade funds cover. Promotion examples show how deposit requirements can vary by builder and inventory type (example promotion reference).
Key Texas contract and title items
Texas uses promulgated forms for many new‑home sales, and your financing must fit the contract timeline and title requirements.
TREC forms and contingencies
Expect to see TREC New Home Contract forms for incomplete or completed construction, plus addenda like the Third‑Party Financing Addendum. Pay close attention to earnest money delivery rules and deadlines, which are enforced under TREC rules. If you are using VA, make sure required VA provisions are included as applicable (TREC rules and forms).
Title, draws, and mechanic’s liens
Before your permanent loan funds, investors require clear title. During construction, unpaid subcontractors or suppliers can file mechanic’s or materialman’s liens. Lenders will ask for lien waivers, final title checks, and evidence that all work has been paid before conversion to permanent financing. Fannie Mae details these lien and completion requirements for deliverable loans (Fannie Mae C2P overview).
Floodplain permits and CO timing
In Houston and Harris County, floodplain permits, elevation certificates, and local inspections can affect schedule and insurance costs. Lenders typically require evidence of permit compliance and a Certificate of Occupancy, or equivalent, before final funding. Confirm whether your lot is in a FEMA Special Flood Hazard Area and what documentation will be delivered at closing (Harris County floodplain guidance).
Risks to plan for early
Understanding these risks helps you set a realistic budget and timeline.
Appraisal gaps on presales
Appraisers typically value your home as completed using plans and specs. If the appraised value is below the contract price, you may need to bring additional cash, renegotiate, or use program‑specific protections when eligible. For VA borrowers, the VA Escape Clause provides a defined process if reasonable value is less than the price (VA escape clause).
Rate‑lock and requalification risk
Long construction periods can outlast a rate lock. In two‑close structures, you may need to re‑qualify for the permanent loan later. In single‑close products, lenders underwrite the permanent terms upfront, but they still have rules on documentation currency and construction periods, which can impact the path to conversion (Fannie Mae C2P overview).
Draws, inspections, and interim interest
Construction loans fund work in draws after inspections. Retainage may apply, and interim interest can accrue during construction. Clarify who pays interim interest, when amortizing payments begin, and how inspection delays could affect your closing date.
Your Houston presale financing checklist
Use this list to stay organized from contract to closing.
- Get pre‑approved with a lender experienced in construction or one‑time‑close loans. If you plan to use FHA or VA, confirm the lender offers those construction products and knows the documentation. Review relevant program pages for specifics (FHA program info, VA Construction & Valuation).
- Read the contract and identify deposit types. Distinguish refundable earnest money from non‑refundable option, design center, or upgrade deposits. Deposit requirements and promotions can vary by builder (promotion variability example).
- Confirm buyer protections. Look for financing and appraisal contingencies where applicable, and ensure required VA language is included for Veterans. Reference TREC forms and deadlines (TREC rules).
- Understand appraisal risk. Ask how your lender handles as‑completed appraisals and what happens if value is short of the contract price. For VA, know how the Escape Clause works if needed (VA escape clause).
- Ask about draw handling and lien waivers. Confirm who pays draws, how the title company manages payments, and when lien waivers are collected to protect clear title at conversion (Fannie Mae C2P overview).
- Check floodplain and permit status. Determine whether the site is in a Special Flood Hazard Area and what elevation and permit documents the builder will deliver at closing (Harris County floodplain guidance).
- Clarify incentives and program limits. Some builder credits must comply with loan program rules. Ask your lender how credits and buydowns will appear on the closing statement.
- Set timeline expectations. Confirm the construction schedule, rate‑lock options, requalification requirements, and the steps and documents needed for conversion to your permanent mortgage.
The bottom line for Houston buyers
Financing a presale in Houston works smoothly when you choose the right loan structure early, read the contract carefully, and align the build timeline with lender and title requirements. Focus on deposits, appraisal risk, permits, and lien waivers so there are no surprises at conversion. With a clear plan, you can secure the home you want and close on time.
Ready to map your presale strategy around your goals and timeline? Connect with the neighborhood experts and concierge support at Nan & Co Properties for tailored guidance on new construction and presales across Greater Houston.
FAQs
Can I use a conventional loan for a presale in Houston?
- Yes. Many buyers either take a construction‑to‑permanent loan or wait until completion for a standard mortgage. Fannie Mae explains how C2P loans convert once the home is finished and liens are cleared.
How much earnest money will a Houston builder require?
- It varies. Production builders often use modest earnest money or promotional deposits, while custom builds can require staged deposits. Always check the contract for refund rules.
What if the appraisal is lower than my presale price?
- You may bring extra cash, renegotiate with the builder, or, for Veterans, rely on the VA Escape Clause process if VA’s reasonable value is below the price.
Will I need flood insurance for a new build in Harris County?
- If your lot is in a FEMA Special Flood Hazard Area or required by your lender or municipality, flood insurance will be required. Expect elevation and permitting documents before final funding.
Who handles lien waivers before my loan converts?
- Your lender and title company will require contractor and supplier lien waivers and final checks to ensure clear title before the permanent loan funds, consistent with investor requirements.
