Final answer:
The buyer would seek a mortgage commitment from a lender to guarantee they can purchase the house upon completion. A down payment is typically required, and service contracts or warranties may offer further security for the transaction.
Step-by-step explanation:
When a builder agrees to use his own funds to construct a house and desires a guarantee that the buyer will be able to purchase the home upon completion, the buyer would seek a mortgage commitment from a mortgage lender.
A mortgage is essentially a line of credit for a home, and obtaining a mortgage commitment helps assure both the builder and the lender of the buyer's ability to complete the purchase.
Typically, mortgage lenders require a down payment, which is often 20% of the home's purchase price; for example, on a $100,000 house, the buyer would pay $20,000 upfront and borrow the remaining $80,000.
Sellers may also offer additional assurances such as a warranty, which promises to repair or replace aspects of the house for a certain time period, or a service contract, which covers repairs for a set time period in exchange for an additional fee.
These can provide added security for both the buyer and the builder that any issues with the house post-completion will be addressed.