You typically pay your down payment in stages during new construction, not all at once at closing like you would with an existing home
With new construction, the builder collects money from you at different points as the house is being built. You might pay an initial deposit when you sign the purchase agreement, another chunk when the foundation is laid, more when the framing is done, and the final portion at closing. The exact timing and amounts depend on your builder's schedule and your loan agreement — there is no single rule that applies everywhere.
This staged approach exists because the builder needs cash to pay workers and suppliers as construction moves forward. You are not paying for a finished house all at once; you are funding the building process in pieces. Understanding when each payment is due helps you plan your finances and avoid surprises.
Key Takeaways
- New construction down payments are split into multiple payments tied to construction milestones, not paid in one lump sum at closing.
- Your purchase agreement spells out the exact payment schedule, including how much is due at each stage and what triggers each payment.
- Your lender may require an inspection before releasing funds for each stage, to confirm the work matches what you are paying for.
- The final payment at closing covers whatever down payment amount remains unpaid, plus closing costs.
- If construction delays happen, your payment schedule may shift, so confirm timing with your builder before each payment is due.
The typical payment schedule during construction
Most builders follow a pattern that looks something like this: you pay a deposit (often 5 to 10 percent of the purchase price) when you sign the purchase agreement. This secures your lot and locks in the price. Then, as construction progresses through major phases — foundation, framing, roof, interior work — you make additional payments. Each payment is usually tied to a specific construction milestone that the builder must reach before you owe the money.
The exact percentages and timing vary widely. Some builders collect 10 percent at signing, 10 percent at foundation, 10 percent at framing, 10 percent at roof, 10 percent at drywall, and the remaining 50 percent at closing. Others use different breakpoints. Your purchase agreement will list the exact schedule for your home, so read it carefully before signing.
These milestone payments are not optional — if you do not pay when the builder reaches a milestone, you are in breach of your purchase agreement. The builder can stop work, keep your deposits, or take legal action. This is why confirming the payment schedule in writing is so important.
How your lender fits into the payment timeline
If you are financing the home with a mortgage, your lender does not straightforward hand you a check for the full loan amount upfront. Instead, the lender releases money in stages that match the construction schedule. This is called a construction loan or construction-to-permanent loan.
Before each payment is released, your lender typically orders an inspection to verify that the work described in the purchase agreement has actually been completed. The inspector checks that the foundation is poured, the framing is up, the roof is on, or whatever milestone you are paying for. If the work is not done or does not match the plans, the lender will not release the funds until it is corrected.
You are responsible for paying the builder the full amount due at each milestone, whether your lender releases funds or not. If there is a gap between when the builder demands payment and when your lender releases it, you may need to cover that gap temporarily with your own money. Discuss this timing with your lender before construction starts so you are not caught off guard.
Your down payment versus your loan amount
It helps to separate two things: your down payment (the money you are putting in) and your loan amount (the money the lender is giving you). If you are buying a $400,000 home and putting down 20 percent, your down payment is $80,000 and your loan is $320,000.
During construction, you pay your down payment in stages. Your lender also releases the loan amount in stages. At closing, you pay whatever down payment remains unpaid, and the lender funds the final portion of the loan. The builder receives the total sale price — your down payment plus the loan — and you receive the keys and a mortgage bill.
Some builders allow you to finance your down payment payments through the construction loan itself, meaning you do not pay cash at each milestone; instead, the lender advances the money and you repay it as part of your mortgage. Ask your lender whether this option is available, because it can ease cash flow during construction.
What happens if construction is delayed
Construction delays are common — weather, supply shortages, labor issues, or design changes can all push back the timeline. When this happens, your payment schedule may shift as well. A milestone that was supposed to occur in month three might not happen until month five, which means your payment is also delayed.
This is usually good news for you, because it means you do not have to pay until the work is actually done. However, it can complicate your finances if you were counting on a specific closing date to move in or refinance. Stay in touch with your builder's project manager about the current timeline, and ask for written confirmation of any changes to your payment schedule.
If delays are severe enough that your construction loan expires before the home is finished, you may need to extend the loan or convert it to a different type of financing. Your lender will guide you through this, but it is another reason to discuss potential delays with your lender early on.
Protecting yourself during the payment process
Before you make any payment, confirm in writing that the milestone has been reached. Do a walkthrough of the home if possible, or ask your lender's inspector to confirm the work is done. Do not pay based on a verbal promise that work will be done soon — pay only when it is actually complete.
Keep copies of every payment receipt and every amendment to your purchase agreement. If a dispute arises later about whether you paid on time or whether the builder completed the work, these documents are your proof. Some states require builders to hold down payment funds in an escrow account (a neutral third-party account) until closing, which protects your money if the builder runs into financial trouble.
Ask your real estate agent or attorney whether your state requires escrow for down payments. If it does, confirm that your builder is using an escrow account before you hand over any money. If it does not, consider requesting escrow anyway as a condition of your purchase agreement.
Frequently Asked Questions
Do I have to pay my down payment all at once when I sign the purchase agreement?
No. You typically pay an initial deposit (often called earnest money) when you sign, which is usually 5 to 10 percent of the purchase price. The rest of your down payment is paid in stages as construction progresses, with the final amount due at closing.
What if I cannot pay when a milestone is reached?
You are in breach of your purchase agreement. The builder can stop work, keep your deposits, or pursue legal action. If you know a payment will be difficult, contact your builder and lender when ready to discuss options — some builders will negotiate a short delay, and some lenders can adjust the loan release schedule.
Can my lender refuse to release funds for a stage of construction?
Yes. If the lender's inspector finds that the work does not match the plans or is not complete, the lender will not release funds until the issue is fixed. This protects you by ensuring the builder is doing quality work, but it can delay your payment obligation if the builder has not actually finished the milestone.
What is the difference between a construction loan and a regular mortgage?
A construction loan releases money in stages as the home is built and usually has a shorter term (often 12 to 24 months). A regular mortgage is a single loan for a finished home. Many construction loans convert to a permanent mortgage at closing, so you end up with one loan instead of two.
Do I pay property taxes during construction?
Usually not until closing, when you officially own the home. However, some jurisdictions assess taxes based on the construction timeline, so ask your local tax assessor's office about your specific situation. Your real estate agent or attorney can clarify what applies in your area.