Buying a home is always an exciting milestone. But there’s something extra special about closing on a brand new, custom-built home. Just imagine – those modern finishes, upgraded appliances, and layout designed just for you!
Closing on new construction has some unique steps compared to a resale home. This guide will walk you through what to expect, from the day you sign your contract to the moment you get the keys. Let’s dig into the full timeline so you can close with confidence!
The New Construction Closing Process Step-By-Step
Building a home from the ground up takes time. While each build varies, you can expect around 6-9 months from breaking ground to closing day.
Here are the key stages of the new construction closing timeline:
Get Pre-Approved For a Mortgage
The very first step is getting pre-approved for a mortgage loan. This shows sellers you’re qualified to purchase the home. According to a 2022 survey, 77% of potential homebuyers get pre-approved before house hunting.
To start, pick a reputable lender and provide documents like your pay stubs, bank statements, and tax returns. They’ll review your income, assets, debts, and credit score to determine the loan amount you qualify for.
With a pre-approval letter in hand, you’ve got the green light to start negotiating with builders!
Sign Your Purchase Agreement
Once you select a home plan with a builder, it’s time to sign the purchase agreement. This legally binding contract outlines the home specifications, price, expected delivery date, and more.
Carefully review this document, as it contains important terms. For example, many builders require using their preferred lender when securing a construction loan. Make sure your agent reviews the agreement too – they can help negotiate favorable terms.
Signing the papers only takes an hour or so. But it kicks off the months-long build process!
Wait For Construction
Now the fun part – watching your custom home come to life! While construction moves along, your lender will convert the construction loan to permanent financing when the home is near completion.
Construction typically takes 6-9 months, sometimes longer depending on weather or materials availability. Be prepared for delays. But the great news is you can still lock in today’s interest rates, even if closing is months away.
Do a Final Walkthrough
About 2 weeks before closing, the homebuilder will contact you to schedule your final walkthrough. This 45-60 minute appointment is your chance to inspect the property and create a punch list of any issues.
With new construction, builders aim for a 100% completed home by orientation. But minor last-minute fixes are common. The builder will address these items before you close.
If repairs can’t be done immediately, they’ll be noted on a post-closing list. This ensures you still close on time while the builder completes cosmetic details.
The Big Day – Closing!
Closing day is finally here – time to get those keys! Closings are usually scheduled about 30 days after completion to allow time for inspections and finalizing details.
You’ll sign the deed, final loan documents, and other legal paperwork to transfer ownership. According to data from ClosingCorp, the average closing appointment lasts 1-2 hours.
Once all signatures are complete and funds change hands, congratulations – the home is officially yours!
What to Bring on Closing Day
You’re so close to moving in! Make sure you’ve got these items for a smooth closing appointment:
Valid Photo ID
Bring valid government-issued ID like your driver’s license or passport. All parties on the mortgage should have an ID ready to verify identities.
Cashier’s Check or Wire Transfer
Closing costs are typically paid with a cashier’s check or wire transfer. This includes your down payment, property taxes, and other fees.
Your closing disclosure breaks down the exact “cash to close” amount needed. Request a cashier’s check or wire the funds to the title company at least a few days before closing.
Closing Disclosure Paperwork
A closing disclosure from your lender outlines all the final mortgage terms, costs, prorations, and other details. Review this carefully a few days before closing and bring it with you.
Proof of Homeowners Insurance
Lenders require home insurance to approve a mortgage. Bring proof of your active policy to closing – usually the declarations page. Confirm with the title company if any other documentation is needed.
Other Paperwork as Requested
Your lender may request additional pay stubs, bank statements, or other paperwork to re-verify your finances right before closing. Compile any other documents the title company asks for as well to avoid last-minute scrambling!
4 Tips for a Seamless Closing Process
Closing day will be here before you know it! Here are some tips for keeping the process running smoothly:
Confirm Your Paperwork is Complete
Carefully review all documents for errors before closing. Missing information can delay the appointment. Double check details like the legal spelling of your name, loan terms, and policy numbers.
Satisfy Purchase Agreement Contingencies
Most contracts include contingencies like a final home inspection that must be met before closing. Don’t leave these until the last minute. Knock them out as early as possible to prevent delays.
Send Requested Lender Documents Quickly
Stay organized with all the pay stubs, tax forms, and bank statements your lender needs. Provide any additional paperwork they request ASAP so there are no issues finalizing your financing.
Avoid Major Financial Moves Before Closing
It may be tempting to open new credit cards for furniture or make other big purchases right before your closing date. Hold off until after you get the keys! Major financial changes can jeopardize your pre-approval.
Timing the Sale of Your Current Home
Selling your existing house while waiting for the new build? Here are some options to bridge the gap between closing dates:
Request a Lease-Back Agreement
If you sell first, consider asking the buyers if you can rent back the home from them until your new construction is done. You’ll pay rent instead of making two mortgage payments.
Get a Short-Term Rental
You can also move into a short-term rental or corporate housing facility in the interim if vacating before closing. Just be prepared to move twice.
Stay with Friends or Relatives
Ask close friends or family if you can temporarily move in with them. It’s a cost-effective way to time the closings, although still inconvenient.
Sell to an iBuyer
An “iBuyer” like Opendoor or Offerpad purchases homes directly from sellers for convenience and speed. You may get a lower price than the open market, but it provides flexibility.
What to Expect on the Big Day
You made it to closing day! Here’s a play-by-play of how events will unfold:
Arrive Early for a Final Walkthrough
About an hour before your closing appointment, you’ll do one final inspection and create a punch list for the builder to address. This ensures no damage occurred since the first walkthrough.
Meet at the Closing Location
Closing appointments are often held at the title company or attorney’s office. Your real estate agent will meet you there to offer guidance during the process.
Sign Paperwork to Complete the Transaction
The closing agent will review and explain all documents before signing. This includes the deed, mortgage note, closing costs worksheet, and title transfer paperwork.
Finalize Your Mortgage
Your lender will provide the final loan documents like the promissory note and settlement statement. Review the terms and sign to finalize your financing.
Bring Sufficient Funds for Closing Costs
Make sure the wire or cashier’s check you arranged covers your down payment, closing fees, prepaid property taxes, and other items due at closing.
Get Your Keys!
Once all money is exchanged and i’s are dotted, you’ll get the keys, garage door openers, and any other items that come with the property. Congrats, you’re officially a homeowner!
It’s Time to Celebrate!
Reaching closing day on your dream home is an amazing feeling. Understanding the detailed process ahead of time ensures you can close with confidence.
With some preparation and teamwork with your real estate agent and lender, you’ll breeze through the final steps to ownership. Before you know it, you’ll be moved into your brand new, custom-built home!