Builder Incentives on New Construction Homes in Northern California

Builder incentives are the concessions a home builder offers to help a home sell: a lower interest rate through the builder's lender, a temporary rate buydown, money toward closing costs, a price reduction, or extras such as upgrades or owned solar. They show up across many communities in the Sacramento suburbs, and they can save buyers tens of thousands of dollars up front and hundreds of dollars a month.

New construction is our specialty at Living In Northern California, a Realty of America team led by Rose and Steven Gonzales, and negotiating these incentives is a large part of what we do for buyers. This guide explains the types of incentives, why builders offer them, when they are strongest, and how to negotiate them. Explore current communities on our new construction page.

• Below-market rates through the builder's preferred lender, sometimes for the life of the loan.
• Temporary buydowns, such as a 2-1 buydown that lowers the rate for the first two years before it settles at the note rate.
• Closing-cost credits that reduce the cash you need at closing.
• Price reductions, most often on quick move-in homes that are finished or nearly finished.
• Upgrades or design-center credits on homes still being built.
• Owned solar included in the price, instead of a lease or an add-on.

Many of the best rate incentives require using the builder's preferred lender, so compare that offer with an outside lender's before you decide.

When higher interest rates push buyers to the sidelines, builders keep homes moving with incentives. A builder selling hundreds of homes a year treats a rate buydown as a marketing expense, which is something an individual seller with one home rarely can do. Builders want communities to keep selling on schedule, and homes that are finished and waiting cost them money every month.

As a result, the strongest offers usually appear on quick move-in homes that can close in 30 to 60 days, and around the end of a quarter or the end of the year, when builders are working to hit sales targets.

Two examples from our own clients in 2024. In one, a buyer received $15,000 off the price, a rate around 5.25 percent through the builder's lender, a 2-1 buydown on top of that, and owned solar included in the purchase price. In another, the builder reduced the price by $25,000 and the buyer added an owned solar system for about $15,000 after incentives.

Each was a specific home at a specific moment. Incentives change by builder, community and month, and what is offered today may be different. That is exactly why it pays to have someone tracking them.

How a lower rate changes the payment

A simple illustration on a $600,000 loan, principal and interest only:

The lower rate saves about $770 a month on the same loan. Taxes, insurance, HOA dues and Mello-Roos come on top, and your lender will give you exact figures for your situation.

The builder's sales team represents the builder, not you. You can negotiate on your own, but buyers rarely see the full range of what is possible without someone who works with builder sales offices regularly. A checklist we use:

• Look for quick move-in homes that need to close soon.
• Ask for the builder lender's rate and compare it with an outside lender's quote.
• Ask for a combination, such as a price reduction plus a buydown or closing-cost credit, rather than a single incentive.
• Ask about owned solar included in the price instead of a lease.
• Watch how quickly the community is selling. When homes sell fast, incentives are often pulled back.
• Register with your agent on your very first visit, because most builders require it for your agent to represent you.

Read do you need a Realtor for new construction for more on what your own agent does.

Many buyers plan to wait for lower rates. That can make sense, but it has a trade-off. When rates fall, more buyers qualify and come back into the market. More competition tends to push prices up and gives builders less reason to offer incentives. A builder incentive that lowers your payment today may be worth more than an uncertain lower rate later, and if rates do fall, refinancing may be an option. Talk it through with your lender; it depends on your plans.

California's building code has required solar on most new single-family homes since 2020. Builders handle it differently: some include owned solar in the base price, some offer it as a purchase option, and some only offer a lease, which adds a monthly payment. When solar is an add-on, buying it outright has often cost in the range of $15,000 to $25,000 in the communities we work in. Ask how solar is handled before you compare two homes, because it changes both the price and your future electric bills.

Ready to see which communities have the strongest incentives this month? See new construction in Roseville, Rancho Cordova or Lincoln, or contact us before your first model home visit.