The down payment timing depends on your contract stage, not the closing date

For new construction, your down payment does not come due all at once on closing day. Instead, you make payments at specific moments tied to construction milestones — usually when the builder reaches certain stages of work. The exact timing is written into your purchase agreement, and it varies by builder, by region, and by how far along the house is when you sign.

Most builders require an initial deposit within 7 to 14 days of signing the contract. This is typically 1 to 3 percent of the purchase price and shows the builder you are serious. Then, as construction progresses, you make additional payments — often called "progress payments" — at points like foundation completion, framing completion, roof on, and final walkthrough. Your final payment (the remainder of your down payment plus closing costs) comes due at closing, which happens after the house is finished and inspected.

The total amount you pay before closing day can range from 10 to 25 percent of the purchase price, depending on your loan type and the builder's requirements. The rest comes from your mortgage at closing.

Key Takeaways

  • Your initial deposit is usually due within one to two weeks of signing the purchase agreement, not months later.
  • Progress payments are tied to construction milestones — foundation, framing, roof, drywall — and are spelled out in your contract.
  • The exact payment schedule is negotiable and should be written into your purchase agreement before you sign.
  • Your final down payment balance and closing costs are due at closing, after the house is substantially complete and inspected.
  • If construction delays happen, your payment schedule may shift, but the builder cannot demand money before the agreed milestone is reached.

What happens between signing and the first payment

When you sign a purchase agreement for new construction, you are not when ready writing a check for thousands of dollars. The builder gives you a window — usually 7 to 14 days — to submit your initial deposit. This deposit is held in an escrow account by a title company or the builder's attorney, not by the builder directly.

During this window, you should have your financing pre-approved. If your lender backs out or you cannot find a loan, most contracts allow you to cancel and recover your deposit, though the exact terms depend on what your agreement says. Read the contingency clause carefully — it tells you whether you can walk away and under what circumstances you lose the deposit.

The initial deposit amount is typically 1 to 3 percent of the purchase price. On a $400,000 home, that is $4,000 to $12,000. Some builders ask for more if the house is already under construction when you buy it.

Progress payments tied to construction stages

After your initial deposit clears, the builder does not ask for money again until construction reaches a specific point. These milestones are listed in your purchase agreement and usually include:

  • Foundation and lot preparation complete
  • Framing complete (walls and roof structure up)
  • Roof on and weathertight
  • Drywall and interior work underway
  • Substantial completion (house is livable and inspectable)

At each milestone, the builder (or the builder's lender) requests the next payment. The amount varies — some builders ask for equal chunks at each stage, others ask for larger payments at later stages. Your contract should specify the exact dollar amount due at each point.

You are not required to pay until the builder has actually reached that stage. If framing is supposed to trigger a payment and the framing is not done, you can withhold payment. This is one reason to have a real estate attorney review your contract — they can clarify what "framing complete" actually means and whether you have the right to inspect before paying.

How much you pay before closing day

The total amount you pay in down payments and deposits before closing typically ranges from 10 to 25 percent of the purchase price. This depends on your loan type and the builder's standard practice.

Conventional loans usually require a 20 percent down payment total, but builders often collect this in stages over the construction period. FHA loans require 3.5 percent down, and VA loans require zero down, but builders may still ask for an initial deposit to hold the lot. USDA loans also require zero down but follow similar deposit practices.

The remaining balance of your down payment (if any) plus all closing costs — title insurance, appraisal, inspection, lender fees, property taxes, homeowners insurance — come due at closing. This is typically 2 to 5 percent of the purchase price on top of your down payment.

What delays construction and what happens to your payment schedule

Construction delays happen. Weather, supply chain issues, labor shortages, and permit delays are common. When delays occur, your payment schedule typically shifts with the construction timeline — you do not pay for a milestone until the builder reaches it.

However, your contract should specify what happens if the builder misses a substantial completion date. Some contracts include a "closing date" that is tied to construction completion, while others have a range or allow the builder a certain number of days past the original date. Read this section carefully.

If the builder is significantly delayed and you need to move by a certain date, you may have the right to cancel and recover your deposits, depending on your contract language. This is another reason to have an attorney review the agreement before you sign — the cancellation and delay clauses matter more than the sales price.

Your final payment at closing

Closing happens after the house is substantially complete, inspected, and approved by your lender. At this point, you pay the final balance of your down payment (if any remains) plus all closing costs. Your lender wires the mortgage funds, and the title company coordinates the transfer of funds and documents.

Before closing, you do a final walkthrough to confirm the house matches the contract specifications and that any punch-list items (small repairs or touch-ups) have been completed. If major issues are found, you can ask the builder to fix them before you close, or you can negotiate a credit at closing to handle repairs yourself.

Closing typically takes 30 to 60 minutes. You sign documents, the lender funds the loan, and the title company records the deed. Once recorded, you own the house and receive the keys.

Negotiating your payment schedule

The payment schedule in the builder's standard contract is a starting point, not a final offer. You can negotiate the timing and amounts of progress payments, especially if you are buying early in construction or if you are paying cash.

If you want to delay your initial deposit, ask. Some builders will extend the important date if you have a legitimate reason. If you want to change when progress payments are due, propose a schedule that works for your financing and cash flow. Builders are often willing to adjust because they want the sale to close on time.

Put any changes in writing as an amendment to the purchase agreement. Do not rely on verbal promises. If the builder says they will wait until framing is done to ask for the next payment, get it in the contract.

Frequently Asked Questions

What happens to my deposit if the builder goes bankrupt before the house is finished?

Your deposit is held in escrow, which means it is legally separate from the builder's business assets. If the builder fails, the escrow account is typically protected and returned to you. However, state laws vary, and some builders use different escrow arrangements. Ask your real estate attorney which state law governs your escrow account and what protections explore.

Can the builder ask for payment before a milestone is actually complete?

Not if your contract says payment is due when the milestone is complete. The builder must reach the agreed stage before requesting payment. If the builder asks early, you can refuse and cite the contract. If disputes arise, your real estate attorney can help enforce the contract terms.

Do I pay property taxes during construction?

Property taxes typically begin when you take title at closing, not during construction. However, some jurisdictions tax the land from the moment you sign the purchase agreement. Ask your real estate attorney or the title company whether you will owe property taxes before closing.

What if I need to back out after making progress payments?

Whether you recover your deposits depends on your contract's cancellation clause and the reason you are backing out. If you cancel without a valid contingency (like financing falling through), you may lose your deposit. If the builder breaches the contract or construction is significantly delayed, you may have grounds to cancel and recover funds. Consult your real estate attorney before canceling.

Is the down payment the same as closing costs?

No. Your down payment is the portion of the purchase price you pay out of pocket; the rest comes from your mortgage. Closing costs are separate fees for services like title insurance, appraisal, inspection, and lender fees. Both are due at closing, but they are different line items on your closing disclosure.