When Do You Start Paying for a New Construction Home? (2023)

You start paying for a new construction home after the closing of the deal and starting your mortgage. A pre-construction home mortgage only starts after the closing, when you get delivery of the home.

When you purchase a new construction home, you will be required to make a deposit following the new construction deposit structure for your builder. Most builders have a similar deposit structure, which allows a percentage based deposit. For example, one home builder may require:

  1. 5% down at signing
  2. 5% down in 30 days
  3. 5% down in 60 days
  4. 5% down in 90 to 180 days

Since most new home construction projects require a 20% deposit – you’ll be asked to provide this within a specified period.

You don’t have to start paying for a new construction home when you sign the purchase agreement. Most pre-construction homes are delivered in 12 to 36 months, so you will have this time to save money. Similarly, if you’re renting a home – you don’t have to worry about making both rent and mortgage payments.

So, if you’re worried about when do you start paying mortgage on a new build – keep in mind that you only start making payments after the home is built, and you get delivery. It wouldn’t be fair for a homeowner to start making payments and incur interest when there is no product delivered.

(Video) 6 Questions to Ask When Buying a New Construction Home!

When is Down Payment Due for New Construction Home?

The down payment for a new construction home is due based on the agreed deposit structure from your home builder. The majority of deposits are required within 180 days of signing the purchase agreement. Although your down payment is required in small increments, it is a good idea to have your down payment ready when you are signing the paperwork.

There are a number of things that can happen – whether it’s your employment or a family emergency. It’s why we recommend new construction home buyers to have the full down payment in the bank before agreeing to purchase a home.


Can You Negotiate Deposit Structure on a New Home?

You can negotiate the deposit structure with your home builder. A new build home will require a 20% down payment, but you can extend the deposit structure. It will allow you to build your equity over a longer period of time to make your deposit. There are home builders who offer an extended deposit structure – up to 180 to 365 days.

When Do You Close on a New Construction Home?

When you sign the purchase agreement, you are given your closing date. This date is an estimate of when the new build home would be ready. Builders can have delays, and this will impact your closing date. Your home builder is required to tell you every time there is a delay in the closing date.

We had a Toronto couple who shared their complete timeline for buying a new construction home. They shared valuable details on all the delays, extra costs and issues they faced buying a new build home. Despite purchasing a pre-construction home during the pandemic – Pras and Linoja were fortunate enough to have their parent’s home to move into for the time being.

What are Closing Costs for New Home Build?

The closing costs for new construction homes include the charges and fees related to the closing of the purchase. This will include title insurance, transfer fees, mortgage fees, lawyer fees and escrow fees. If a home builder has a good relationship with a lender, they may ask you to work with this preferred lender. When using this preferred lender, you will get incentives and have lower closing costs.

So, how much are closing costs on a new construction home? The average closing cost is between two and five percent of the purchase price of the home.

(Video) START-TO-FINISH NEW CONSTRUCTION PROCESS | Buying New Construction Home Tips

How Long Does it Take to Close on a New Construction Home?

It can take anywhere from 12 to 36 months on average to close on a new construction home. It will ultimately depend on the development, how early you are to get in and possible delays and strikes to name a few.

We’ve seen new home buyers receive their home in 10 months, and some receive their home in 22 months. There are too many factors at play when building a new home.

Keep in mind that there are multiple important dates you need to be available for when building a new home. Depending on how smoothly these milestones go; will also impact the closing date of your new build home. We recommend reading our complete timeline for buying a new construction home. We go into the nitty gritty details of purchasing a new build home in Ontario.

The wonderful graphic designers at 2ELVE Digital recently created an infographic for timeline for new home construction. You might want to pin that somewhere, so you know what to expect when building a new house.

When Do You Start Paying Property Taxes on New Construction Home?

You start paying property taxes on a new construction home depending on when you take possession of the property. The property taxes are paid on March 1 and September 1 of every year to cover the next six months of the year.

(Video) New Home Construction Start to Finish (My Experience Buying a New Construction Home!)

New construction homes are likely to have higher property taxes.

Will the Upgrades Increase My Down Payment?

Yes and no. Let’s assume your builder upgrades total to be $90,000 (this is considered low in some areas). The additional cost could be paid by you in cash, but why? The other option is to finance the cost of the upgrades. When you do so, you will be adding this to the cost of the home. Remember that 20% rule, where you have to pay 20% down to avoid mortgage default insurance? Yep, it’s going to kick in here. So you have two options here:

  1. You add the $90,000 to your existing mortgage amount and fall below the 20% mark and pay a hefty sum of money for mortgage default insurance.
  2. You pay 20% of the $90,000 on top of your deposit to cover the down payment and finance the remaining 80%. In effect, your down payment would increase by $18,000 and your mortgage principal being borrowed would increase by $72,000.

This can impact a number of things, mainly your qualification for your mortgage. If you barely qualified for a $700,000 mortgage, and now your amount has gone up by $72,000 – what do you think will happen? Yep, you may no longer qualify.

It is crucial that you always take into account the cost of upgrades and closing when budgeting for a new build home. The upgrades alone in some Toronto new construction homes can add up to $150,000 – very quickly!

If you had a pre-approval for a mortgage based on the base price of the model home, it’s time to re-visit your mortgage advisor and see if you can qualify for more.

(Video) Want to Buy A New Construction Home? Start Now!! | Gwinnett County Real Estate Broker | Buyer Tips

The upgrades in a new construction home may increase your down payment, the principal mortgage borrowed, interest cost of borrowing and final price of the home.


What are the first 5 steps in new home construction? ›

A Step-by-Step Guide to the Home Building Process
  • Prepare Construction Site and Pour Foundation.
  • Complete Rough Framing.
  • Complete Rough Plumbing, Electrical and HVAC.
  • Install Insulation.
  • Complete Drywall and Interior Fixtures; Start Exterior Finishes.
  • Finish Interior Trim; Install Exterior Walkways and Driveway.

When building a new home What is the order of the first for construction steps? ›

Newcomer's guide to the new home construction process
  • Step 1: Site prep. ...
  • Step 2: 1st Inspection. ...
  • Step 3: Framing. ...
  • Step 4: Plumbing, electrical, and HVAC. ...
  • Step 5: 2nd inspection. ...
  • Step 6: Insulation. ...
  • Step 7: Drywall. ...
  • Step 8: Exterior finish.
Oct 6, 2021

How to build a house while paying a mortgage? ›

A construction loan is typically a short-term loan (usually the one-year maximum) used to cover the cost of building your home. During the construction phase, the loan is released gradually as the work progresses. Typically, you will only pay interest on the loan during this time.

What is the timeline for building a house? ›

The average new home building process takes approximately seven to eight months, per the US Census Bureau. This timeframe includes finalizing plans and obtaining permits, the actual construction of the home, and the final walkthrough.

What I wish I knew before building a house? ›

10 Things I Wish I Knew Before Building A Home
  • Research the builder. ...
  • Stick to your guns. ...
  • Dark Laminate Wood is unforgiving in every way. ...
  • You need extra closets/storage space. ...
  • Don't be the first one in the neighborhood. ...
  • Get a regular front door. ...
  • Get bedrooms on one level. ...
  • The extra space is tempting.
Jun 18, 2019

What should you not do when building a house? ›

Top 10 Mistakes to Avoid When Building a Home
  1. Choosing the Wrong New Home Builder. The biggest mistake you can make is choosing the wrong new home builder. ...
  2. Picking the Wrong Homesite. ...
  3. Not Doing Your Research. ...
  4. Not Being Realistic. ...
  5. Moving Too Fast. ...
  6. Choosing the Wrong Materials. ...
  7. Skimping on Details. ...
  8. Not Staying Organized.

What are the 7 stages of construction? ›

Here's the process:
  • Step 1: Design. During this phase, the client places a project for bidding. ...
  • Step 2: Pre-Construction. ...
  • Step 3: Procurement. ...
  • Step 4: Construction. ...
  • Step 5: Commissioning. ...
  • Step 6: Owner Occupancy. ...
  • Step 7: Project Closeout.

How do I know if I can afford to build a house? ›

To calculate 'how much house can I afford,' a good rule of thumb is using the 28/36 rule, which states that you shouldn't spend more than 28% of your gross, or pre-tax, monthly income on home-related costs and no more than 36% on total debts, including your mortgage, credit cards and other loans, like auto and student ...

What are the five stages of construction? ›

The five phases of the construction project lifecycle are:
  • Project Initiation and Conception. Like with all things, the first step to the construction life cycle is merely to begin. ...
  • Project Planning and Definition. ...
  • Project Execution and Launch. ...
  • Project Performance. ...
  • Project Close.

Why is it harder to get a mortgage on a new build? ›

Mortgage lenders are often stricter on the amount they are willing to lend on the purchase of new builds. This is to protect themselves from the inevitable devaluation of the property in the early years.

Is it harder to get a loan to build a house? ›

Construction-Only Loan

With so many variables like the builder's cooperation, getting approvals from local municipalities and more, these are considered higher-risk loans. This means they're harder to qualify for, and the interest rate will likely be higher than a traditional loan.

What to do while waiting for house to be built? ›

Although you won't be moving for a few months, there are still things you need to do while waiting for your home to be built.
  1. ●Declutter and get rid of unwanted items.
  2. ●Start packing ahead of time and store items in temporary storage.
  3. ●Research movers and find out how far in advance you need to book your moving service.
Jun 25, 2021

What is the longest stage of building a house? ›

How long does each stage of construction take?
  • The slab or base stage: 1-2 weeks.
  • Frame stage: 3-4 weeks.
  • Lockup stage: 4 weeks.
  • Fit-out or fixing stage: 5-6 weeks.
  • Practical completion stage: 7-8 weeks.
Sep 7, 2022

What is the best month to build a house? ›

The good news is that the fall and winter months are often when building supplies and construction costs are lowest due to lower demand- this means you can get started on your new home at just the right time! Building houses during the winter months can have its advantages.

What is the fastest time to build a house? ›

Shelby county habitat for humanity on 17 December 2002 broke the then world record for the fastest house ever built, that is, in 3 hours, 26 minutes and 34 seconds.

What are the 3 most important things when buying a house? ›

Here's what to look for when buying a home.
  • The Location. They say the three most important things to think about when buying a home are location, location, location. ...
  • The Neighborhood. Be sure the neighborhood, and not just the house, meets your expectations. ...
  • The Kitchen. ...
  • The Closets and Storage. ...
  • The Windows and Lighting.
Jul 19, 2022

What should you not skimp on when building a house? ›

Splurge only on those things you truly cannot live without. However, don't skimp on structural components or doors and windows — for the safety and security of your home, you'll want to purchase the best you can afford in these areas.

Do you regret buying new construction? ›

Sixty-six percent of buyers of new-construction homes say they feel some form of regret about the process. Twenty-six percent wish they had purchased an existing home instead, according to a new survey conducted by Clever Real Estate.

Why you shouldn't buy a new build? ›

Typically new builds go down in price after you buy them, a bit like a car. This is because new builds have the premium price tag that's out of character for the area, so they come down before they go up – meaning it can take a while to start seeing any equity in your property.

What builder upgrades to avoid? ›

New Construction Upgrades to Avoid
  • Appliances. If appliances aren't included with the house, you may be better off buying them yourself. ...
  • Lighting. Another new construction upgrade to avoid is lighting. ...
  • Cabinet hardware. ...
  • Kitchen backsplash. ...
  • Outdoor space. ...
  • Crown molding.
Mar 16, 2022

What to do before construction? ›

7 Things to Consider Before You Build
  1. Choosing the right Architect to help with the Design. ...
  2. Make sure your project has the right amount of details. ...
  3. Have your finances in place. ...
  4. Have a realistic budget. ...
  5. Know thy neighbours. ...
  6. Always do your own research. ...
  7. Selecting the right Builder. ...
  8. Enjoy the experience.

What is the most crucial stage of construction? ›

Completing the Framing

This process does take a while and it is important that everything is done correctly. This essentially sets the groundwork upon which all the other aspects of your building will follow.

What does Phase 3 mean in construction? ›

“Phase III engineering involves representing the client after Phase II Engineering (i.e. plans, specifications, estimates, etc.) is complete and the contract is awarded to a construction firm.

How much do you have to make a year to afford a $500000 house? ›

How much do I need to make for a $500,000 house? A $500,000 home, with a 5% interest rate for 30 years and $25,000 (5%) down will require an annual income of $124,192.

Is it financially better to buy or build a house? ›

Is it cheaper to build or buy a house? As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.

What credit score is used to build a house? ›

Backed by the Federal Housing Administration, FHA construction loans have a minimum 500 credit score requirement with a 10% down payment — meaning you could build your dream home, even with less-than-perfect credit.

What questions should you ask a custom home builder? ›

20 Important Questions To Ask A Custom Home Builder
  • How long have you been building custom homes? ...
  • Do you have a portfolio of the finished custom homes you've built? ...
  • How customizable is my custom home? ...
  • Can you help me pick out the perfect homesite?
Jan 12, 2021

How long does a house take to build after drywall? ›

Prepare the site – if needed (1 to 2 months) Begin construction (3 weeks or more)

Are new builds overpriced? ›

There are many advantages to a new build-property, which is also why they are more expensive. They come with lower maintenance costs and these homes are generally far more energy efficient which means gas and electricity bills are also lower.

Do new builds lose value? ›

How Much Do New Builds Lose in Value? New build houses have been known to lose value by over 7%. However, the extent of the loss in value does not represent the entire picture. As well as the loss in value, you need to take into account that you may have lost out on a price increase if you had purchased an old home.

Why do banks not like new builds? ›

This is because most lenders believe new home buyers are paying a premium prices for new homes and the home will lose value the moment you move in. It can be very difficult to re sell a new home (at the fair market price) whilst the house builder's sales staff is still on the development.

Is a construction loan cheaper than a mortgage? ›

Construction loans usually have variable rates that move up and down with the prime rate. Construction loan rates are typically higher than traditional mortgage loan rates.

How much can I borrow for a new build mortgage? ›

With a standard self build mortgage you can typically borrow up to 75% of your project costs, while with BuildStore, you can borrow up to 95% of 95% of your project costs, 100% if you already own your plot, with a maximum of up to 85% of the expected end value of your new home.

Do you have to pay mortgage if you buy a house in full? ›

No Mortgage Payments, Interest Or Other Fees

Paying in cash means you get to skip the mortgage process and all the costs and fees that come with it, including interest rates or mortgage insurance. Skipping out on interest can save you a lot of money in the long run.

What not to do before closing on a house? ›

Do not:
  1. Buy a big-ticket item: a car, a boat, an expensive piece of furniture.
  2. Quit or switch your job.
  3. Open or close any lines of credit.
  4. Pay bills late.
  5. Ignore questions from your lender or broker.
  6. Let someone run a credit check on you.
  7. Make large deposits to your accounts outside of your paycheck.
  8. Cosign a loan with anyone.

How long can you reserve a new build house for? ›

Secure your new home

You may need to pay reservation fees when an offer is made, or a sale is agreed upon, to 'reserve' a new build for a set period (usually 28 days). This also facilitates the legal process leading to an exchange of contracts.

What is the longest lasting material to build a house? ›

Stone lasts a very long time and is one of the most durable materials to use in building and construction. It can be more difficult to move and transport around due to its weight, but it is naturally resistant to the elements and is also aesthetically appealing.

How long does it take to build a house once it is framed? ›

Seven months is the average amount of time it takes to build a house. This data comes to us from the Census Bureau and the National Association of Home Builders. There are a lot of pros and cons to building a home and we dive into a few of the more common questions below!

What comes after flooring in new construction? ›

They include interior and exterior finishes:
  • Wall texture. Determine if you want smooth or rough walls, bullnose or knife nose edges, etc.
  • Interior Trim. ...
  • Flooring. ...
  • Cabinets. ...
  • Interior paint. ...
  • Hardwood floors. ...
  • Touch ups. ...
  • Countertops.
Jul 19, 2018

Is 2022 good year to build a house? ›

Yes 2022 can still be a good time to build your custom forever home, despite rising costs and interest rates. Building your custom home is an investment in your family's lifestyle and should be looked at as a long term financial & lifestyle decision of living in your forever home for 5 or more years.

Which month is good for house construction 2022? ›

Good days to start house construction in 2022
DateSolar monthNote this before construction
April 14BaisakhGood time for north or south-facing homes
May 14JethGood time for north or south-facing homes
June 14AshadhaAvoid construction
July 14ShravanGood time for east or west-facing house
8 more rows
Dec 25, 2022

What month are houses the cheapest? ›

The window between late fall and early winter is the best time for buyers on a budget. Keep in mind, fewer homes are for sale in the cold winter months and around the busy holiday season, so the selection of for-sale homes will be limited.

What is the cheapest style house to build? ›

Ranch Homes

A home with a simple and concise layout is the cheapest type of house to build. Ranch homes are typically single-story structures with attached garages. They're easy to find construction plans for and highly customizable, so you can find a home that fits your needs and budget.

How long do new builds take to build? ›

On average it can take approximately 6 months to complete the build of a house. However, it can be as little as 4 months or potentially more than 12 months. For a pre-designed house, you are looking at roughly 4-6 months, while custom designs can take longer at an expected 10-16 months.

Can a house be built in 2 months? ›

These are great questions that everyone building a new home should ask. The answer is, yes, you can build a quality home in 90 days with today's advanced techniques and products. It's not the norm and it takes some good planning, but it can be done.

What are the 5 stages of construction project? ›

The five phases of the construction project lifecycle are:
  • Project Initiation and Conception. Like with all things, the first step to the construction life cycle is merely to begin. ...
  • Project Planning and Definition. ...
  • Project Execution and Launch. ...
  • Project Performance. ...
  • Project Close.

What are the 5 basic parts of a house? ›

The basic structure of many modern houses includes a foundation, frame, roof, door, chimney, windows, garage, yard, driveway and mailbox.

What are the stages of a new build? ›

Some of the key phrases and stages of construction of your new home are briefly explained here.
  • Foundation. This is the beginning of the construction process. ...
  • Superstructure. ...
  • First Fix. ...
  • Second Fix. ...
  • Decoration. ...
  • Finals. ...
  • External Works. ...
  • Familiarisation Visit.

What is normally on the first floor of a house? ›

In the United States, the first floor and ground floor are usually equivalent, being at ground level, and may also be called the "lobby" or "main floor" to indicate the entrance to the building.

What holds a house up? ›

Foundation. Most houses are held up by cinder blocks under the exterior, perimeter wall of the house. Mortar holds them together and allows them to seat properly to be there a long time. Under the concrete blocks, however, is the footer. The footer is the concrete poured into the ground.

What is the most important area of a house? ›

The kitchen is by far the most important room in the house for a buyer. A well-apointed kitchen dramatically increases the value of your home. As you build your new home to meet your personal interests and needs for your kitchen, you should consider these items in your kitchen design: Modern appliances.

How long does it take to build a house after concrete? ›

Concrete takes about four weeks days to cure fully, but the next step (framing) can begin after it's about 50% cured. So you can count on an additional two weeks after the foundation is poured before proceeding. Crews also drill and dig for wells or septic tanks at this point.

Do new builds go up in value? ›

Similarly, new build prices have inflated by 10.6% more than existing stock in Redbridge, London; 9.3% more in Oldham, Greater Manchester; and 9.1% more in Merthyr Tydfil in Wales. If you compare new build prices with existing stock in the past decade, it's a similar story.


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