To choose a home builder, check their license and insurance, look at finished homes and talk to past clients, compare at least three line-item bids, and read the contract and warranty before you sign. Your construction lender will also vet the builder, typically looking for a licensed general contractor with liability and workers’ compensation insurance and at least two years in business.
How to choose a home builder, step by step
- Make a shortlist from local home builders associations, recommendations, and builders active in the area you want to build.
- Check credentials: state or local license, general liability and workers’ compensation insurance, and any complaints.
- Visit finished homes and homes under construction. Look at the quality of framing, finish work and site tidiness.
- Call references, especially recent clients. Ask about budget, schedule, communication and how problems were handled.
- Compare line-item bids for the same plans and specifications, not just the total.
- Review the contract and warranty with care, ideally with a lawyer.
- Confirm lender approval before you sign, especially for FHA, VA or USDA loans.
Questions to ask a home builder
- How many homes like mine have you built in the last two years?
- Is the contract fixed-price or cost-plus?
- What allowances are included for cabinets, flooring and fixtures?
- How are change orders priced and approved?
- What is the schedule, and what happens if it slips?
- Who supervises the site day to day?
- What warranty do you provide, and who handles warranty claims?
- Will you provide lien waivers from subcontractors with each draw?
Fixed-price vs cost-plus contracts
| Fixed-price | Cost-plus | |
|---|---|---|
| How it works | one agreed price for the defined scope | actual costs plus a fee or percentage |
| Risk of overruns | mostly on the builder | mostly on you |
| Best for | standard plans, clear specs | complex custom homes |
Red flags
- Large upfront deposits before work starts
- No written contract, or vague allowances
- No proof of license or insurance
- Pressure to sign quickly or skip permits
- Reluctance to provide references
More on the building process
- Steps to building a house
- Home building checklist
- How long it takes to build a house
- Build vs buy
- Cheapest way to build a house
- How to choose a home builder
- Being your own general contractor
- What is a spec home?
Sources
- The Lenders Network: Construction loan requirements (updated June 2026)