Backing out of building a home?

My husband and I are in the process of building a track home. However, we could not lock in an interest rate and now they are steadily creeping up. We found a much less expensive home that is way bigger than the one we are building. The best part is - if they accept our offer, it is ready right away, meaning we can lock in an interest rate. I am curious to know if it is too late to back out of this home we are building? We have been pre-approved and submitted good earnest money, but even that we would make back if we buy the less expensive home. I am also wondering if this will affect our credit? Do people back out of building homes often? Any help would be really appreciated!!