When Do You Close On A New Construction Home? [Tips For A Smooth Closing]
Building a new home with the ideal layout, latest features, and modern touches is an exciting process for many home buyers. You get exactly what you want in your new home without settling for dated features or a less-than-ideal layout of a previously owned home or a production home.
If you’ve already decided to build a custom home, you’ll need to work with an architect and designer to perfect the design and hire a builder to construct your dream home. But once all of the work is done, there’s still one major step to take: closing on your new construction home.
This post will walk you through everything you need to know about closing on your new construction home.
What Does Closing On A House Mean?
Closing is the final process of buying a home. Home closing is the process of executing the final paperwork and ensuring all purchase contract conditions have been met before ownership of the property is transferred from the seller to the buyer. The closing documents will include a final loan statement, a deed transferring ownership of the property, and various disclosures required by state and federal law. The buyer and seller will sign all the necessary documents, and the closing agent will then record them with the county clerk. At this point, you will officially be the owner of your new home.
How Does Closing On A New Construction Home Differ From A Resale?
When you buy a new home, the closing process will look nearly identical to closing on a resale home. But the timeline may look slightly different depending on the type of new home you’re purchasing. A move-in-ready home will typically close in 30 days, similar to a resale home. Depending on the home construction timeline, a custom home can take longer than 30 days. No matter the timeframe, the principles of closing on a home remain the same: you’re transferring the ownership of the property from the seller to the buyer.
How Long Does Closing On A New Build Take?
Most new homes take 6-9 months to construct, depending on your level of customization. When it comes to closing on a newly constructed home, there are many moving parts, so knowing what to expect ahead of time can help make the process go more smoothly.
How long does it take to close on a house after you submit your builder purchase contract?
You will not close on your new home until the builder has completed construction. Submitting a builder purchase contract signifies that you and the builder have agreed to specific terms, conditions, and pricing for constructing your new build. Still, it can take several months until you reach closing day once you’ve signed this agreement.
Before the builder begins construction, you need to schedule an appointment with their design center to make selections for fixtures, finishes, and custom upgrades. The builder can begin construction once both parties have approved designs and they have a crew ready. Then, it takes 6-9 months to complete the construction of your new home. Then you’re ready to close.
How long is the closing day?
If you've completed all the necessary steps, the closing day only takes a few hours. Typically, you will do a final walk-through of the home with the builder to make sure everything meets your standards. Then you will go to the closing location to sign all the necessary paperwork and walk away with the keys to your brand new home.
House Closing Day Timeline
House closing is an exciting time. It’s the final step in your new home build, but there are several things you must do as a buyer to make sure closing goes smoothly. Here's a timeline of what to expect during the house closing process.
The buyer gains mortgage pre-approval before house hunting
If you are looking to finance the purchase of your new home, you need an accredited pre-approval letter from a mortgage lender before you begin talks with builders. Contact a lender and have your pay stubs, bank statements, credit score, and other financial details ready to review. You should compare interest rates between lenders for mortgage loans.
It’s important to note that some builders will require you to get pre-approved through their preferred lender. Pre-approval doesn’t mean you’ll be required to obtain financing through that lender.
The day you sign the purchase agreement with the builder
The purchase agreement with the builder is the contract both parties sign that lays out the terms of the contract, the price of the build, the estimated construction timeline, who will pay what fees, and other responsibilities of the builder and buyer. You will also discuss financing and compare rates with your lender and your builder’s preferred lender. There are often incentives to use your builder’s preferred lender.
Signing the purchase agreement shouldn’t take longer than an hour but could take more time if either party wants to amend the contract. It’s essential to have your real estate agent review the builder’s purchase agreement before you agree to sign.
30 - 60 days before closing
You should gather all the necessary paperwork and documentation you will need to secure your home loan with the bank. Builders can set the closing process up to 60 days from the estimated completion date. During this time, you’ll want to shop around for a homeowners insurance policy, which your lender will require.
Buyers may consider locking in their mortgage rate during this phase.
One month before closing
About 30 days before the estimated completion date, you should receive a formal notice from the builder about the official location, time, and closing date. They will also inform you of the title company doing the closing and provide you with the relevant wire details so you can send in your funds before the closing appointment.
Two weeks before closing
The final two weeks before closing is when the builder completes all the last-minute touches and finishes so the home is move-in ready. You will do your independent home inspection and blue tape inspection during this period. The builder will also do your homeowner orientation to show you all the new features and functions of your new home.
At least three days before closing, the title company will provide you with a closing disclosure to review, including the terms of the sale, mortgage information, fee details, and any other crucial information you’ll need to prepare before closing.
The actual closing day on a new build doesn’t take too much time when you’ve done all the necessary steps beforehand. The closing day generally takes a few hours, including the final walk-through and signing of the required paperwork.
What Do You Need To Bring To Closing?
Once construction is complete, the only thing standing between you and your new home is the actual closing appointment. Let’s look at the essential things you’ll need to bring on closing day.
You’ll need to bring a valid ID, like a passport or driver’s license, to your closing appointment to prove to the title company that you’re the rightful homeowner. Anyone else listed on the mortgage, like a spouse, will also need to bring a valid ID.
Cashier’s check or wire transfer
In most real estate transactions, buyers pay closing costs with a cashier’s check or wire transfer. This payment is known as cash to close. If you are paying with a cashier’s check, you’ll need to bring payment on closing day to pay for your down payment, property taxes, fees, and closing costs.
For a wire transfer, you'll need to ensure that you have the correct account and routing number for the recipient. You'll also need to confirm the amount of money you're sending. Once you have all the necessary information, you can initiate the wire transfer.
The title company will provide you with the closing disclosure at least three days ahead of time, specifying the amount of cash to close you’ll need. Once you have this information, request a cashier’s check or initiate the wire transfer in this amount from your bank, as it may take a few days for them to prepare it.
The closing disclosure is a five-page document that describes the details of your mortgage, including the loan term, monthly estimated payments, and any fees or closing costs. You should receive this from the lender three days before closing, so make sure you have reviewed it and have it in your possession before the closing appointment.
Proof of insurance
You have to secure homeowners insurance before your lender approves you for a mortgage. Bring proof of the homeowner's policy to your closing appointment. The declarations page is usually sufficient, but double-check with the title company to see if you need to bring additional documentation.
When is the down payment due?
You will need to make your down payment on closing day. If you made any earnest money deposits held in escrow, the title company would credit this amount to your closing costs and down payment.
Tips For Making The Closing Process Smoother
Even though it can be a lengthy process to wait for the builders to finish construction and close on your new home, there are ways you can speed up the process and get in your new build quicker.
Make sure your documents are error-free
As we’ve discussed, there are several documents you’ll need to have on hand for closing day, including proof of homeowner’s insurance and the closing disclosure, among others.
Double-check all documents beforehand to catch any errors in the spelling of your name or loan details. If you need to request corrected documents, it could delay your closing and move-in date.
Verify contingencies are handled
Your purchase agreement likely has some contingencies that you’ll need to complete before closing. For a new build, this may include a final home inspection to identify any potential defects or issues in the construction. Not completing these contingencies by your closing day could result in delays.
Complete all requests from your lender
You don’t want any financial issues to get in the way of your closing day. Give the lender all the requested documents in time for them to approve your loan ahead of your closing date. It’s good to check back with them ahead of your scheduled closing to provide any last-minute details they may need.
Don’t make changes to your finances until you officially close
One mistake people make while buying a home is making other significant financial decisions simultaneously. Financial changes include changing jobs or taking on new debt, which could make the agreement with your lender fall through. Even if you’re pre-approved for the loan, don’t make any of these major financial decisions until you’ve officially closed.
Give money transfers and loans enough time to go through
You may decide to pay your closing costs and downpayment with a wire or ACH transfer rather than with a cashier’s check. In this case, you’ll want to give the transfers enough time to go through by your closing date.
Plan on initiating the transfer a day or two before your closing date so the builders have their funds and are ready to transfer ownership of the property to you.
Ensure your title is clear
Ensure that the home’s title is clear before your closing date to prevent delays. A clear title means that the property has no outstanding liens, judgments, or claims against it. In the case of a new build, this likely shows up when a home doesn’t have the proper surveys or inspections done or if there are unresolved code violations that the builder will need to correct.
Don’t get scammed
Unfortunately, there are major mortgage scam schemes that you must avoid. Don’t fall victim to these devastating ploys that can ruin your closing date and cost you additional money. One primary way scammers are targeting new homebuyers is during the closing process.
For example, the homebuyer might receive a last-minute request to change the wire details to an illegitimate bank account. Be wary of any requests of this sort when you’re nearing your closing date. Verify any requested changes in person or over the phone with your Realtor.
How To Time The Closing Of Your Current House With The Closing Of Your New Build
If you are selling your current home and purchasing a new home simultaneously, you’ll want to time things correctly so that the closing dates line up favorably for you. Otherwise, you could end up paying two mortgages at the same time or be without a house while you wait for your new home to be completed.
Estimate 6-9 months for a new build
After the builders have begun construction, it should take 6-9 months to finish your home. You should speak with a local Realtor (that's where we come in) about the best time to list your current house during this time. Selling too early could cause you to need temporary housing while waiting too long could leave you with two overlapping mortgages.
However, the estimated completion date of your new home can give you and your agent a good idea of when it makes sense to sell your home given the market in your area and how quickly they expect your home to sell.
But be prepared for delays
The completion date of your new home depends on many factors, including the cost and availability of building materials, weather conditions, and more. Therefore, you should expect some delays in the construction process of your new build.
Give yourself some leeway when selling your existing home or arrange for temporary housing. The completion date is always subject to change and could push your closing date back by weeks or even months in some instances.
Will the builder allow me to move into my new construction home early?
You cannot move into a new build until you’ve closed on the house in most cases.
First, no one can live in the home until the certificate of occupancy is completed, which occurs after the final inspections and appraisals. Second, you could face issues or penalties from your lender if you move in before they convert the construction loan to a mortgage. Finally, the builder may need to forego any final additions or finishing touches and request payment in full if you decide to move in early.
The timeline of these approvals and regulations typically won’t allow you to move into your new construction home before you’ve closed on it and are the rightful owner.
Tips For A More Flexible Closing
The timeline for selling your current home may not line up with the closing of your new build. You have some options if you end up in this scenario.
Negotiate a leaseback with your current home
If you sell your current home before closing on your new build, you may be able to request a leaseback from the new owners before they need to move in. A leaseback means you enter into a short-term lease agreement with the new owner and pay rent for a few weeks or months until your new home is ready.
This option won’t always be available to sellers. However, negotiating this arrangement can save you the trouble of finding a new place to live or storing your belongings while you wait for your new build.
Use a short-term rental
Many areas have short-term rental options available. You can move into a short-term rental space while you wait to close on your new home. Unfortunately, this means you need to move your belongings twice in a short period, but it could be necessary for certain situations.
Stay with friends or relatives
Another potential living arrangement while you’re between houses is to move in with friends or family while waiting to close on your new home. Staying with friends or family is a cheaper option, but you’ll still have to move twice.
Wait to sell your home until the new construction is ready
In certain instances, you may be able to wait to close on the sale of your existing home until your new build is ready. Waiting to sell won’t be available in all situations, but if the buyers are flexible and willing to work with you, this could be a good option that only requires you to move your belongings once.
Sell your home to an iBuyer
When selling your home to an iBuyer, you can sell your house much faster than if you were to sell it on the open market. Finding an iBuyer may require you to pay higher fees or accept a lower home price, but it allows for a quick transaction if you’re hoping to move into your new home on a tight timeline and avoid paying two mortgages.
Use Felix To Buy The Home Of Your Dreams
There’s no better feeling than closing on a new build that you know meets all your wishes and features all the best qualities of a modern home. After securing the funding, successfully navigating the closing process, and receiving the title to the property, you can walk away with the keys to the home that’s uniquely yours.
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