What to Expect When Closing on a New-Build Home


Two people signing papers to buy a home

Closing on a house is an exciting and somewhat cumbersome process. It's helpful to know what to expect. Let’s talk about the key steps to closing a new home.

What to Expect When Closing on a New Home

Closing on a new-build home is the final step before the house is finally yours. Here are a few things to keep in mind as you start this process:

  • Be patient. The new construction closing process can take a while. There will be many documents to read through, and inspections and negotiations to have. With the right professionals and following the steps below, you'll be well on your way to crossing the threshold of your new home!
  • Budget for additional costs. Buying a home is expensive, and while the down payment is crucial, there are additional costs to purchasing a home. Make sure you budget for service charges, government fees, escrow payments, closing costs and more.
  • Find a buyer's agent. While it's not necessary, it's recommended you find a buyer's agent for new construction. It's not a bad idea to have someone with your best interests in mind to help navigate unfamiliar terms and ask questions.

Steps to Closing on a House

So, when do you close on a new construction home? The average time to get from application to closing is 47 days. Once the seller accepts your offer and earnest money (the money given to secure the contract) it's common to have to wait a while to secure your actual closing date. Below are ten steps you can expect from closing on a new-build home.

1. Open an escrow account.

This account collects your payments and is managed by a third party, such as a bank, your title or escrow agent. Once all procedures are finalized, the money and documents will be moved from the account to the seller and buyer.

2. Get a title search and insurance.

A title search ensures no one else can make a claim on the property and that there aren't any outstanding issues with the house. Title insurance, or hazard insurance, provides peace of mind and protects real estate owners and lenders.

3. Prepare your closing costs and documents.

Get a certified check or money order for final closing costs, which can make up between two and five percent of the purchase price of your home. These costs may include the following:

  • Origination fees – This is a fee charged by lenders for processing the application.
  • Service charges – These charges can include:
    • Appraisal
    • Credit report
    • Tax status
    • Title search and insurance
    • Survey fees
  • Transfer taxes and recording fees – These can vary from state to state and can be paid by either the buyer or seller. The tax is paid to the government and then the transfer taxes can be negotiated between the buyer and seller.
  • Escrow items – These final items include the following:
  • Homeowners insurance
  • Property taxes
  • Primary mortgage insurance (if applicable)
  • HOA fees (if applicable)

4. Have the home inspected.

Just because it's a new build doesn't mean it might not have problems. A roof that isn't installed correctly will likely wear out quickly and could lead to potential water damage. For this reason, and more, a home inspection can catch and correct any problems, if there are any.

5. Get a pest inspection.

This is separate from the home inspection. A specialist will ensure there aren't any wood-destroying insects that could destroy your home. Sometimes a mortgage company will require this inspection and that any pest issues are fixed before the deal closes.

6. Renegotiate the offer.

If any repairs need to be made based on the inspections, consider renegotiating the offer. Or, you can keep the purchase price the same, but ask the seller to pay for the repairs.

7. Complete mortgage application.

This step requires you to submit paperwork and financial records. Consider getting preapproved by a mortgage lender before starting your home search. This will not only speed up the process for the final approval, but it can lock in your interest rate so you aren't vulnerable to changes in the market.

8. Get a lender appraisal.

Oftentimes, mortgage lenders will require a house appraisal to determine its value. Ideally, the appraiser will value the home for at least as much as the agreed-upon purchase price, but if it's low, consider renegotiating the price.

9. Final walkthrough.

You can choose to have a final walkthrough to ensure everything is in order. This will also include a rundown of the systems and features of your new home.

10. Sign the papers.

Take your time with the agreements, even though they might be long. Read the fine print and make sure the interest rate is correct. Feel free to contact an attorney if you have concerns about the documents.

When all that is done, take your keys and enjoy your new home!