Types of Home Loans to Consider When Buying New Construction

When you're building something as personal as a brand-new home, the right loan matters just as much as the right floor plan. Different types of home loans come with different benefits, and our team is here to help you sort through them. Whether you're a first-time buyer or ready to build your forever home, this guide breaks down the different loan programs available to finance it.

Government-Backed Loans: FHA and VA Options

Government-backed loans are supported by federal agencies, offering added protection and more flexible terms for buyers. These loan types can make homeownership possible, especially for those who may need a little extra support in qualifying.

FHA Loans

An FHA loan is insured by the Federal Housing Administration and is especially helpful for first-time buyers who don’t have a large down payment saved. In 2024, 82.6% of FHA home purchase loans went to first-time buyers, making this a proven path to new homeownership.

Here’s what makes FHA loans a popular option:

• Insured by the Federal Housing Administration
• Lower down payments and credit requirements
• Ideal for first-time buyers
• Loan limits vary by county
• FHA loans are assumable
• Non-occupant co-borrowers (such as a relative) may be used for loan qualification by combining incomes

Curious if you qualify? We’d be happy to walk you through county-specific limits and what they mean for your home search.

VA Loans

Central California has a strong military community, and VA loans are a powerful benefit for those who’ve served. The Department of Veterans Affairs backs these loans and offers outstanding terms for eligible service members and veterans.

Key features of VA loans include:

• Backed by the Department of Veterans Affairs
• $0 down payment
• No Private Mortgage Insurance required
• Competitive interest rates
• Limited to eligible veterans and service members

If you're buying in California’s Central Valley and have military ties, our team can help guide you with VA loan eligibility.

Conventional Loans for New Construction Buyers

A conventional mortgage loan is not backed by the federal government. It is instead funded by private lenders and typically requires a higher credit score compared to government-backed loan programs. Conventional mortgages come primarily in two categories: Conforming and Jumbo. This distinction refers to the loan amount.

• Conforming loans fit within the loan limits of Fannie Mae and Freddie Mac.
• Jumbo loans, on the other hand, have larger loan amounts, and may come with higher interest rates.

Conforming Mortgage Loans

A conventional conforming home loan is one of the most popular types of loans for new construction homes. It’s funded by private lenders and works well for buyers with steady income and strong credit, and some savings for a down payment.

Key features of a conventional loan include:

• Offered through private lenders
• Typically requires 5%-20% down payment
• Best for those with strong credit
• Can be used to finance primary, secondary, or investment property

Is a conventional loan the right loan for you? A conventional loan may be a good choice for you if the home you're buying falls within the conforming loan limits for your area.

Jumbo Loans

A jumbo loan, also called a non-conforming loan, is best for a homebuyer who needs a larger loan amount that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.

Here’s when a jumbo loan may be the right fit:

• For homes above conforming loan limits
• Often used for high priced or luxury homes
• Typically requires stronger credit and a higher down payment
• Can come with fixed or adjustable rates

If you're building your forever home, a jumbo loan could be an option worth exploring with our mortgage team.

Choosing the Right Loan with McCaffrey Home Mortgage

Every buyer’s path is different, and that’s exactly how we approach it. Our McCaffrey Home Mortgage team takes time to understand your lifestyle, timeline, and financial goals, then walks you through the types of home loans that make the most sense for your situation.

Whether you're eyeing a quick move-in home in Tesoro Viejo or planning to build from the ground up, we make the financing process feel simple and stress-free. With rates and prices still favorable, now’s a smart time to take the first step. You don’t have to figure it all out alone—our team is here to guide you.