New construction down payments usually start at 10 percent, but can range from 3 to 20 percent depending on your loan type and the builder

The down payment for a new construction home works differently than buying an existing house, mainly because the builder controls the timeline and often has preferred lenders. Most builders require between 10 and 20 percent down, though some will accept as little as 3 to 5 percent if you use an FHA loan or their preferred lender. The exact amount depends on three things: which loan program you choose, whether you use the builder's lender, and how far along the construction is when you buy.

Unlike a resale home where you might negotiate with a seller, new construction down payments are usually set by the builder or their lender. Some builders offer incentives that reduce your effective down payment — they might cover closing costs or offer a credit toward upgrades, which lowers what you actually pay out of pocket at signing.

Key Takeaways

  • Conventional loans typically require 10 to 20 percent down for new construction, while FHA loans may allow 3.5 percent if the builder accepts them.
  • Builders often have preferred lenders who may offer lower down payments or cover some closing costs as a way to lock in your purchase.
  • You usually pay the down payment in stages — a smaller amount at contract signing and larger amounts as construction reaches certain milestones.
  • The further along construction is when you buy, the larger your initial down payment may be, since the builder has already invested in the project.
  • Builder incentives like closing cost credits or upgrade allowances can reduce what you pay out of pocket, even if the stated down payment percentage stays the same.

How down payments are structured during construction

New construction down payments are rarely paid all at once. Instead, you pay in stages tied to construction milestones. At contract signing, you typically put down 1 to 3 percent as an earnest money deposit — this shows the builder you are serious and is held in escrow. This deposit is credited toward your final down payment at closing.

As construction progresses, you make additional payments at key points: when the foundation is poured, when framing is complete, when the roof is on, and sometimes at other stages the builder sets. The builder's lender or the builder itself will tell you the exact schedule when you sign the purchase agreement. Your final down payment — the remainder after all these stage payments — is due at closing, which happens after the home is finished and inspected.

This staged approach helps both you and the builder manage cash flow. You are not paying the full amount upfront, and the builder gets funds as work progresses. If construction is already underway when you buy — say the framing is done — your initial down payment will be larger because you are catching up to where the project already is.

Down payment differences by loan type

Conventional loans (not backed by the government) typically require 10 to 20 percent down for new construction. Some lenders will go as low as 5 percent, but you will pay private mortgage insurance (PMI) if you put down less than 20 percent. PMI is an extra monthly cost that protects the lender if you stop paying.

FHA loans (backed by the Federal Housing Administration) allow down payments as low as 3.5 percent for new construction, but not all builders accept them. FHA loans require mortgage insurance as well, built into your monthly payment. The advantage is a lower upfront cost; the trade-off is a slightly higher monthly payment over the life of the loan.

VA loans (for military members, veterans, and surviving spouses) often require zero down payment on new construction if you are buying a home the VA has approved. However, you will still have closing costs to cover. USDA loans (for rural properties) also allow zero down in some cases, though they have strict location and income limits.

Your loan type is often decided before you even look at homes. If you are unsure which you may have access to for, a mortgage lender can pre-may have access to you and tell you what down payment range to expect.

Using the builder's preferred lender

Most builders have a preferred lender — sometimes a mortgage company they own or have a close relationship with. Using this lender often comes with incentives: lower down payments, covered closing costs, or rate discounts. Some builders will credit you $5,000 to $15,000 or more toward closing costs or upgrades if you use their lender.

You are not required to use the builder's lender. You can bring your own mortgage company to the table. However, if you do, you may not receive those incentives, and the builder may be less flexible on timing or other terms. It is worth getting a quote from both the builder's lender and at least one outside lender to compare the true cost — down payment, interest rate, closing costs, and any credits or incentives.

Ask the builder's lender for a Loan Estimate, which shows all costs in one document. Compare it side-by-side with estimates from other lenders. Sometimes the builder's incentive makes their lender the better deal even with a slightly higher rate; sometimes an outside lender is cheaper overall.

What happens if construction is already started

If you are buying a home that is already under construction — say it is 50 percent complete — your down payment situation changes. The builder has already spent money on labor and materials. Your initial down payment at signing will be larger, often 5 to 10 percent instead of the 1 to 3 percent for a home not yet started.

The remaining stage payments still follow the construction schedule, but there are fewer of them since some milestones are already passed. Your closing down payment (the final piece due at the end) will be smaller because you have already paid more upfront.

If you are buying a completed new construction home — one the builder finished but has not sold — you are treated almost like a resale purchase. You will likely need a full down payment at closing rather than staged payments, and the builder may be more willing to negotiate on price or incentives since the home is not selling.

Builder incentives that reduce your out-of-pocket cost

Builders use incentives to move inventory, especially in a slower market. These incentives do not change the stated down payment percentage, but they reduce what you actually pay out of pocket. Common incentives include closing cost credits (the builder pays some or all of your closing costs), upgrade allowances (free or discounted kitchen cabinets, flooring, or appliances), and rate buy-downs (the builder pays to lower your interest rate for the first few years).

A closing cost credit is the most useful for down payment purposes. If the builder credits you $10,000 toward closing costs, that money stays in your pocket instead of going to the lender, title company, or inspector. You can use it to cover your down payment, your earnest money deposit, or other out-of-pocket costs.

Always ask what incentives are available. Builders do not always volunteer them, and they vary by location, season, and how long a home has been on the market. Get the incentive offer in writing as part of your purchase agreement so there is no confusion at closing.

Timing and what to have ready before you buy

Before you sign a purchase agreement, know how much cash you have available for the down payment and stage payments. You will need to show proof of funds — usually bank statements from the last two months — to the builder or lender. This proves you actually have the money and are not borrowing it (lenders have strict rules about borrowed down payments).

Have a pre-qualification or pre-approval letter from a lender before you make an offer. This tells the builder you can actually finance the home and shows what down payment range you can handle. It also speeds up the closing process because the lender already knows your financial situation.

Ask the builder or their lender for the full payment schedule in writing. Know exactly when each stage payment is due and what triggers it. Some builders tie payments to construction progress; others use calendar dates. Understand the difference so you are not caught off guard by a payment due before you expected it.

Frequently Asked Questions

Can I use a gift for my down payment on new construction?

Yes, most lenders allow down payment gifts from family members. You will need a gift letter from the person giving the money, stating it is a gift and not a loan you have to repay. The lender will verify the funds came from the gift-giver's account. Some lenders require the gift-giver to be a relative; others are more flexible.

What if I cannot afford the down payment the builder is asking for?

Ask about incentives, builder financing, or using a different loan type. Some builders offer in-house financing or will negotiate on the down payment if you are a strong buyer otherwise. You can also look at homes further along in construction or completed homes, where builders may be more flexible. If the builder will not budge, an outside lender might offer better terms.

Do I lose my earnest money deposit if the deal falls through?

It depends on why the deal falls through. If you back out without a valid reason, you usually lose the deposit. If the builder fails to finish on time, the home has major defects, or your financing falls through for reasons outside your control, you should get the deposit back. Your purchase agreement spells out which situations let you walk away with your money. Read it carefully before signing.

Is the down payment the same whether I buy during construction or after it is finished?

No. During construction, you pay in stages tied to milestones. After the home is finished, you pay the full down payment at closing, like a resale home. Buying during construction can mean a lower initial payment, but you are locked in longer and have less flexibility if your situation changes.

Can the builder change the down payment amount after I sign the contract?

No, the down payment percentage and payment schedule should be locked into your purchase agreement. However, if you change the loan type or lender, the down payment requirement might change. Always keep a signed copy of your agreement and refer to it if questions come up.