Do you mean the builder will finance the construction or the builder will finance the final mortgage? Those are two different things. The other thread you mentioned was a different scenario: essentially holding back the builder's paycheck. That's very different than earnest money which will be used as the down payment for the house. I can't imagine a builder financing the construction of a house for you without a down payment. Without that, he could sell it someone else. One warning--unless the builder is doing the final mortgage financing (and personally I find that hard to believe) you are probably months away from locking in a rate. The only time I've heard of a builder providing financing for the final mortgage was large national builders that had a financing arm of the corporation. This post was edited by rrah on Fri, Apr 4, 14 at 18:22

The bank has a legitimate concern. I don't know where you are building, but I am originally from a rural area where people moved into the area and built nicer than average houses and when it is time to sell they do not get their money out of the houses because the locals can't afford the those houses and other people who move into the rural area to enjoy rural life build their own homes so the houses get sold for a loss. Your credit is good now, but you could be in a car accident that destroys your credit rating over night (well in 3 years when the litigation is complete). The reality is that the risk of building a nicer than average home in a rural area has to be on you, not the bank. Since you have lots of cash, another option for you would be to increase your down payment so that the principal amount of the loan is less than the rural value of the house. This also happens to the locals too--those who can afford to build nicer than average houses do so knowing that they probably won't get their money out of them if they have to sell them in the short-term.

I will warn you now, you got me on my soapbox.... Pay in cash. I was raised, if you can't buy it, you can't afford it. Luxuries are to be bought, not finanaced. In this day and age, that is hard to live by and is not always fun. Not that you are in this situation, but as a society, we live in a "I want it now" world and finance ourselves to our eyeballs. We have friends who make good money, have pools, cars, elementary kids with cell phones, kids closets full of Abercrombie/Limited Too, dirt bikes, boats, etc and they own nothing and make payments on everything. Lending institutions and commissioned sales people (sorry to those of you who are not like this) do not have your financial interest at heart. The more you spend, the more you borrow, it's better for their pocket, not yours. When you are encourage to spend more...run/turn the other cheek. Don't give power to others over your wallet! On our pool build this year (shot-crete on Tuesday), we lacked 15k for paying in cash. All we wanted was 15k loan and based on our FICO (over 800 each) and our home equity, the lending institution ignored the request for the amount at a locked in rate but instead, wanted to give us a 90K credit line with a variable rate. Of coarse, you only pay on what you use but come on! Variable rates go up. And steep sometimes. All these home forclosures all over the country-the majority were variable rates, not fixed rates. I'm sorry, but that is encouraging someone to get into dept. That really chapped our hide. The loan guy was not selling us so his manager came over to hard sell us. It felt so cheasy and slimy. Getting in dept is a huge epidemic these days anyway. Lending institutions are not looking out for you. Don't fool yourself that they are. I say, figure out on paper your absolute monthly expenses with no luxuries and make an emergency fund. That should be your untouchable savings. Do not use up the majority of your liquidity for a luxury. Then, find the money to pay for the pool. If you have to save for another year, so be it. Rice and beans, beans and rice (as Dave Ramsy says) Discipline yourselves to pay a monthly payment to yourself, instead of a bank, to rebuild that account. We ended up cancelling the loan application and cashed in part of an investment. While at first we were tentative to do this, we now feel soooooo good about writing the checks for our build and know that we own it NOW, not in 10-15 years with variable interest rates. My pool will go without pretty lawn furniture this year. I found $5 foldable strap lounges at WalMart. It'll have to do. What I want I need to buy at the same time so it all matches, so I am saving for next year. Ok, I'm off my soapbox.

In your post you state "There are still questions about when the builder will start building". Based on my personal experience I can tell you that if building has not started yet it could be unrealistic to expect a 6 month turnaround. I contracted to build a new home in June 2006. At the time the expectation was that the home would be complete by the end of 1Q07. I had a home to sell, and the contract was non-contingent. A building permit was not issued until March 2007 due to various challenges with site development. That June, with the home fully framed out, I paid 1% for a 150 day lock with floatdown option. (If you remember, rates were spiking very hard that month). The 150 days came and went, and the home was not complete-I was unable to close on it. We ended up having to walk away from the deal. That turned out to be the best decision we ever made and the neighborhood has basically gone under with only 2 homes occupied by owners and a dozen others in various states of non-completion. We had NO reason to think that the tide would turn-the builder appeared to have deep pockets, having completed a very high end recreation facility in the community before any closings had taken place. I was fortunate that the lender was able to use the 1% towards closing costs on the home we bought instead. If I had it to do over again I would have taken my chances with rate, and I think that in the current environment rates will likely stay very much in their current range as a worst case scenario. There is simply too much downward pressure on rates as a result of the markets.