Model homes are built when a developer, building firm or investor is planning a new development. The model home is there to show prospective buyers what they will be getting, what the end product will look like after their home is built. Model home loans are exactly what they sound like: financing for this specific home. Builders and developers will often seek this type of loan because this home is built well before any of the other homes in the development are built. Because of their purpose, model homes are an important piece of these projects. Model homes are sometimes sold after a development is complete or all of the lots are pre-sold.Model home loans, like other loans, have their own set of terms and conditions which must be agreed upon by both parties prior to funds being lent. Interest rates and repayment terms will likely vary based on market, credit worthiness and other factors.