Foreclosure (REO) purchases
A foreclosure — often called an REO (Real Estate Owned) once the bank takes it back — is a home the lender now owns after the previous owner defaulted. You're buying directly from the bank's asset management department, not a homeowner.
What's different
- Sold strictly as-is. The bank won't make repairs or negotiate based on inspection findings the way a typical seller might.
- Bank addendums often override your standard purchase contract. These are written to protect the bank, not you — read them carefully, and have your realtor or real estate agent walk you through anything unfamiliar before you sign.
- Multiple-offer situations are common, sometimes with a "highest and best" bidding process rather than simple back-and-forth negotiation.
- Utilities may be shut off, which can complicate a thorough inspection — it's often worth requesting they be turned on beforehand so systems can actually be tested.
Once your offer is accepted, the loan process itself typically moves at a fairly normal pace — but vacant or distressed properties can sometimes trigger extra appraisal scrutiny. Talk to your loan officer about whether a longer rate lock makes sense for your specific file.
Short sales
A short sale happens when a homeowner owes more on their mortgage than the home is worth, and their lender agrees to accept less than the full payoff to allow the sale. The seller isn't fully in control here — their lender has to approve the deal too.
The timeline is the real challenge
This is the single biggest difference from any other purchase type: approval from the seller's lender can take anywhere from several weeks to several months, and sometimes considerably longer. It depends entirely on that lender's internal process, not anything you or the seller can control directly. Set your expectations accordingly, and stay in close contact with your realtor or real estate agent for updates.
What else to expect
- Like foreclosures, short sales are typically sold as-is — inspections are mainly for your own information, not negotiating leverage
- Because approval can take so long, your financing needs to stay current — a pre-approval or rate lock obtained too early may need to be refreshed before you actually get to close
Given how unpredictable short sale timelines can be, locking too early is a real risk — you could face expensive extensions or a fully expired lock before the seller's bank even responds. Floating your rate until you have an actual approved closing date is often the smarter approach.
New construction
Buying a new-build home from a production builder — whether a spec home already underway or one you're customizing from their existing floor plans — comes with its own considerations.
What's different
- Builder contracts are written by the builder, and tend to favor them. Have your own realtor or real estate agent (not just the builder's on-site sales rep) review it before you sign.
- Builder-affiliated lenders often come with an incentive attached — it may or may not actually be your best available deal. It's worth comparing against outside financing before assuming it's automatically the right choice.
- Completion timelines shift. Weather, material delays, and labor availability can all push your closing date later than originally quoted.
- You'll need a certificate of occupancy before you can close — the home has to be fully finished and pass final inspection first.
Since completion dates can move, it often makes sense to float your rate rather than lock early — then lock in once you're roughly 30-45 days from your builder's confirmed completion date. See the Rate Locks & Floating section of our Homebuyer Journey guide for the full explanation.
Custom home construction
Building a home from scratch — your own lot, your own builder, your own plans — is the most involved path, and it requires a different type of financing entirely: a construction loan.
How construction loans work
Instead of receiving your full loan amount upfront, funds are released in stages called draws — tied to completed milestones like the foundation, framing, mechanical/electrical/plumbing rough-in, drywall, and interior finishes. Your lender typically sends an inspector to confirm each stage is actually complete before releasing that draw. During construction, you generally make interest-only payments on whatever has been drawn so far, not the full loan amount.
One-time close vs. two-time close
- One-time close (single-close): your construction loan and permanent mortgage are combined into a single closing upfront. Once the home is finished, it automatically converts to a standard mortgage — no second closing, no second set of closing costs.
- Two-time close: you close on a separate, standalone construction loan first, then refinance into a permanent mortgage once the home is complete. This means two closings and two sets of closing costs, but can offer more flexibility in some situations.
Other things to expect
- Down payment requirements are typically higher than a standard purchase — often 10-25%, and higher still if you're acting as your own general contractor rather than hiring a licensed one
- Builder's risk insurance is generally required to cover the property during construction
- Construction periods are often capped by your specific loan program — commonly up to 12 months for the build itself
The same floating strategy applies here as with production new construction: since your true closing date isn't fixed until the build is essentially done, floating through most of construction and locking around 30-45 days from estimated completion is often the more efficient approach than locking (and potentially extending) at the very start.