Buying a new construction home is a thrilling experience.
You get to be the first to live in it, design it to suit your taste, and enjoy the modern amenities of brand-new homes.
However, closing on a new construction home differs from closing on an existing home.
You need to consider various factors, such as timelines, inspections, and financing.
In this blog post, we will guide you through the process of when to close on a new construction home and what to expect along the way.
Whether you are a first-time homebuyer or a seasoned homeowner, this guide will provide valuable information to help you make a successful purchase.
For homebuyers, closing on a new construction home is the final step towards owning their dream home.
Closing refers to the settlement process where the legal property transfer occurs, and funds are transferred from the buyer to the seller. The timeline for closing on a new construction home may look slightly different compared to closing on a resale home, depending on the new home’s purchase type.
A move-in-ready home typically closes in 30 days, while a custom home may take longer.
Once construction is complete, the final closing process can take a few hours, during which the buyer does a final walk-through of the home and signs all necessary paperwork at the closing location.
What Do You Mean By “Closing On A New Construction”?
Closing on a new construction home is the final step in home-buying.
It is the transfer of ownership from the seller to the buyer and involves executing final paperwork and meeting purchase contract conditions.
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 timeline for closing on a new construction home may vary based on the type of home purchased.
A final walk-through is conducted on closing day to ensure everything meets the buyer’s standards and the necessary paperwork is signed.
Overall, closing on a new construction home is an exciting time for the buyer, and with careful preparation, it can be a smooth process.
What Is The Difference Between A New Construction Home And A Resale Home?
When considering buying a home, there are two options: a new construction home or a resale home.
While both have their benefits, there are some differences to remember.
A new construction home offers buyers the chance to build a home with modern features and personalized touches.
The layout and design of the home are exactly what the buyer wants without having to settle for less.
New homes are built to meet stringent energy efficiency standards, making them greener and more cost-effective in the long run.
On the other hand, resale homes may have a unique charm and character that cannot be found in a new-construction home.
However, they may require costly repairs and maintenance due to wear and tear.
However, choosing between new and resale homes comes from personal preference, budget, and lifestyle needs.
What Are Things To Consider When Starting The Closing Process
When starting the closing process for a new construction home, there are several things to consider.
The first step is to ensure that the buyer has obtained pre-approval from a mortgage lender and has compared interest rates for mortgage loans.
Once the purchase agreement with the builder is signed, the construction process can begin, typically taking around 6-9 months.
Before the actual closing day, the buyer must attend a final walkthrough with the builder to ensure that everything meets their standards.
It is recommended to schedule homeowner orientation approximately 7–9 days prior to closing to learn about the important features of the home and to address any concerns.
Two weeks before closing, confirm the date, time, and location with the title company and ensure that all loose ends are taken care of before the big day.
When Do You Sign The Purchase Agreement With The Builder
If you are buying a new construction home, signing the purchase agreement with the builder usually occurs after the buyer has selected their desired floor plan and lot.
This agreement will outline the terms of the sale, including the purchase price and any agreed-upon options or upgrades.
Once signed, the builder will begin construction on the home, which can take several months to complete.
Before closing, the buyer will have the opportunity to do a examine the home with the builder to ensure that everything is completed to their satisfaction.
As the closing date approaches, the buyer will receive a closing schedule and confirmation letter outlining specific details for the closing, such as the location and time.
On closing day, the buyer will sign numerous legal documents, pay any remaining closing costs, and receive the keys to their brand-new home.
When Is The Closing Day Of A New Construction Home?
Closing of a new construction home typically occurs after the builder has completed construction, which can take anywhere from 6 to 9 months, depending on the level of customization.
Once construction is complete, the final paperwork process begins, which includes a final loan statement, a transfer of ownership deed, and various state and federal disclosures.
The buyer and seller will sign all necessary documents, which will be recorded with the county clerk.
The closing day usually only takes a few hours, during which the buyer will do a final walk-through with the builder to confirm everything is as agreed upon.
Afterward, the buyer will head to the closing location to sign all paperwork and receive the keys to their new home.
It’s important to be prepared and understand the home closing process to ensure a smooth transition to homeownership.
What You Need To Take For A Closing Appointment
Those purchasing the home should bring a few things when preparing for a closing appointment for a new construction home.
First, don’t forget to bring a valid photo ID, such as a driver’s license or passport.
Buyers should also bring proof of homeowner’s insurance, as most lenders require it before finalizing the sale.
If the buyer is financing the home, they should bring a cashier’s check or wire transfer receipt for the closing costs and down payment.
It’s also a good idea to bring a copy of the purchase agreement and any other relevant documents related to the home purchase.
Finally, buyers must list any questions they have for the builder or closing agent.
Being prepared with these items can help ensure a smooth and efficient closing appointment.
What Are The Factors That Affect The Closing Timeline
The timeline for a new home’s construction can be affected by several factors.
The level of customization and complexity of the home design can impact how long it takes to complete construction and prepare for closing.
Weather conditions, material availability, and construction delays can also affect the timeline.
Further, the buyer’s financing situation can impact the closing timeline, as obtaining pre-approval and securing a loan can take time.
Overall, the buyer should stay in touch with the builder and real estate agent throughout the process to manage expectations and to ensure the work is completed on time.
How To Make The Closing Process Flexible
To make the closing process flexible, it’s important to communicate openly and frequently with all parties involved.
Be proactive in managing expectations and potential delays, particularly for new construction homes.
Keep the lines of communication open with your real estate agent, builder, and lender to ensure that everyone is on the same page and any issues can be addressed promptly.
It also helps to have a flexible closing date in mind and be willing to adjust as needed.
This can be especially important if there are unforeseen delays due to weather or other factors outside of your control.
Finally, be prepared by reviewing all closing documents ahead of time, including the HUD-1 settlement statement and any disclosures required by state and federal law.
You can help ensure a smooth and successful closing process for your new construction home by staying organized, proactive, and flexible.
What Are The Common Closing Issues And How to Avoid Them
Closing on a new home is an exciting moment, but it can also be stressful due to the hurdles that may arise during the process.
Some common issues that can delay the closing include pest damage, low appraisals, title claims, and defects found in the home inspection.
Financing falling through or buyers and sellers backing out can also be a challenge.
To mitigate these issues, conducting a termite inspection and getting title insurance are crucial to ensuring no one else lays claim to the property.
A professional home inspector will find any defects due to human errors.
Moreover, getting a second opinion on appraisals and addressing any defects found during the inspection can help negotiate a fair price.
Bottom Line
Closing on a new construction home is the final and exciting process of transferring ownership from the seller to the buyer.
While the process is similar to closing on a resale home, the timeline may differ depending on the type of new home being purchased.
A move-in-ready home typically closes in 30 days, while a custom home can take longer than 30 days, depending on the level of customization.
It can take several months before reaching closing day once the buyer and the builder have agreed to specific terms, conditions, and pricing for constructing a new home.
Before the builder begins construction, the buyer must schedule an appointment with their design center to select fixtures, finishes, and custom upgrades.
Then, the builder can begin construction, which takes 6–9 months to complete before closing day.
Overall, the buyer must complete the necessary steps to ensure the closing goes smoothly.
FAQS
How Many Closing Entries Take Place When Closing A New Construction Home?
When closing on a new construction home, there are typically two closing entries that take place.
The first closing entry is for the purchase of the land, which includes costs such as property taxes, seller concessions, and any other expenses related to the purchase of the land.
The second closing entry is for the home’s construction and involves the property’s actual building. This includes the cost of labor, materials, financing, and any other expenses related to the construction process.
What Is A Closing Checklist?
A closing checklist is a document used during the home-buying process to ensure that all required steps have been completed before the sale is finalized.
The checklist includes tasks for both the buyer and seller, such as completing all necessary paperwork, verifying closing costs, and transferring property ownership.
What Are The Three Main Steps Of Closing A New Construction Home?
The first step is to do a final walkthrough of the home.
The second step is to review and sign the HUD-1 settlement statement. This document outlines the terms and conditions of the new mortgage loan, including monthly payments and closing costs.
The final step is to gather all necessary paperwork, and the buyer will attend the closing meeting with attorneys, title company representatives, and possibly bank or lender representatives, where they will sign legal documents and pay closing costs to take full ownership of the property.