Buying or building a home is an exciting milestone, but it comes with some important financial details to understand before you get the keys.
One of the biggest questions new homeowners face is, “What exactly are closing costs on new construction homes, and how much should I expect to pay?”
These fees can vary widely depending on your lender, location, and whether you’re purchasing an existing home or building from the ground up. By knowing what’s included and when they’re due, you can plan ahead and avoid last-minute surprises.
Let’s break down exactly what closing costs mean for your new construction home, and how to navigate them with confidence.
Closing costs are the fees and expenses due at the end of a real estate transaction, when the ownership of your new home officially transfers to you.
In new construction, these costs typically cover:
● Loan origination fees (charged by your lender)
● Title insurance and title search
● Appraisal and inspection fees
● Recording and transfer fees
● Attorney or escrow fees
● Prepaid taxes and homeowner’s insurance
● HOA initiation fees (if applicable)
These expenses are paid at “closing,” which is the final step in the home buying process.
The average closing costs on new construction homes typically range from 2% to 5% of the home’s purchase price.
Here’s a quick example:
On a $400,000 new home, closing costs might range from $8,000 to $20,000.
That range depends on your location, lender, builder, and whether you choose to roll some costs into your
mortgage.
In most cases, the buyer pays the majority of closing costs - but that’s not a hard rule.
Some spec-home or production builders offer closing cost incentives as part of their sales package. These
might include:
● Covering a portion (or all) of your closing costs if you use their preferred lender or title company
● Offering closing cost credits as part of a seasonal promotion
● Rolling builder-paid closing costs into the final price of the home
So, do builders pay closing costs? Sometimes… especially if it helps close the deal.
Here’s how closing costs compare when building new vs. buying an existing home:
New Construction:
Existing Home:
If you’re tight on funds, there are several ways to reduce or delay your out-of-pocket expenses:
Builder Incentives – Many builders offer promotions that cover part (or even all) of your closing costs, especially if you use their preferred lender or title company.
Lender Credits – Some lenders will reduce your upfront costs in exchange for a slightly higher interest rate, helping you keep more cash on hand at closing.
Roll Costs Into the Loan – Depending on your lender and loan type, you may be able to add certain fees into your mortgage, spreading the cost out over time instead of paying it all at once.
The key is to start these conversations early in the process.
By discussing your budget and financing options with both your builder and lender upfront, you can uncover opportunities to save and avoid stressful, last-minute surprises on closing day.
While exact costs vary, here’s a rough formula you can use:
Estimated Closing Costs = Purchase Price x (2% to 5%)
So if your home is $450,000, your closing costs might fall between $9,000 and $22,500.
Want a more precise number? Ask your lender for a Loan Estimate (LE) document.
Closing costs are typically due at the closing appointment, right before you get the keys.
Most often, you’ll:
● Bring a cashier’s check or wire funds to the title company or attorney
● Review and sign your final loan documents
● Get your keys and celebrate!
Some lenders may allow you to roll some closing costs into your mortgage. Just be sure to confirm ahead of time.
Here are nine questions to ask a lender to ensure they are the right fit for your situation.
When you’re building a custom home, the process and the closing costs can look a little different compared to buying a spec home or production home from a builder.
Here’s why.
Instead of closing once on a completed home, you’ll typically close twice during the process:
1. First, on the construction loan (before building begins)
2. Then, on the final mortgage once the home is complete
This two-step financing process means you’ll incur two sets of closing costs, although some lenders can roll the second into the final loan to reduce your out-of-pocket expenses.
But while there are more moving parts, there are also key advantages:
When done right, building a custom home gives you more flexibility and financial clarity, especially if you're working with a builder who values transparency.
Just make sure you’re clear on what costs are due at the construction loan closing versus the final mortgage so you can plan accordingly.
Some lenders offer a one-time close loan, meaning you only pay one set of closing costs, even though the loan covers both the construction phase and the permanent mortgage once your home is complete.
One of the biggest factors to consider with this loan type is the locked-in interest rate:
The takeaway? Ask detailed questions upfront so you understand all the terms, rate options, and potential
scenarios.
That way, you’ll be ready for the build without any financing surprises.
Closing costs are the final expenses paid at closing on a new home purchase. They usually include lender fees, title insurance, prepaid taxes, recording fees, and other administrative charges.
Closing costs for a new build typically range from 2% to 5% of the home’s price. For example, on a $400,000 home, expect about $8,000 to $20,000 in closing fees.
Yes. Many builders, especially spec-home or production builders, offer to pay some or all closing costs if you use their preferred lender or title company. This can significantly reduce your out-of-pocket expenses.
Closing costs on new construction can be slightly higher due to builder-specific fees and warranty programs. However, builder incentives often offset these costs, making them comparable to existing homes.
If closing costs are a challenge, consider builder incentives, lender credits, down payment assistance programs, or negotiating with the seller. Some buyers also roll eligible fees into their mortgage to spread payments over time.
Closing costs aren’t the most exciting part of building a new home, but understanding them can make the entire process smoother and less stressful.
At Turner & Son Homes, we’re not just here to build your house. We’re here to help you feel confident every step of the way… including the closing table.
We’ll walk you through every number, explain every fee, and even help you explore options to reduce your upfront costs.
Curious what your closing costs might look like on your land?
Reach out today and we’ll break it all down for you. No pressure, no hidden fees, just honest answers.