Will You Pay Different Closing Costs for a New Construction Home?

4 July 2025

Buying a home is one of the biggest financial decisions you'll ever make. It's exciting, nerve-wracking, and full of surprises—especially when it comes to closing costs. If you're thinking about purchasing a newly built home, you might be wondering: "Will I pay different closing costs compared to a resale home?"

The short answer? Yes, you will. But the differences might not be quite what you expect.

Let’s break it all down so you know exactly what to expect when closing on a new construction home.

What Are Closing Costs?

Before we dive into the differences, let's take a quick refresher on what closing costs actually are.

Closing costs are the fees and expenses you have to pay when finalizing a real estate transaction. They typically range from 2% to 5% of the home's purchase price. These costs cover things like:

- Lender fees
- Title insurance
- Appraisal fees
- Home inspections
- Property taxes
- Homeowners insurance

For resale homes, the seller often covers some of the costs, but when you're buying a new construction home, the game changes.

How Do Closing Costs Differ for New Construction Homes?

When buying a brand-new home, you might notice that closing costs can be higher than they would be for a resale home. Here’s why:

1. Builders Rarely Cover Closing Costs

In a typical home sale, buyers and sellers negotiate who pays for what. Sellers often agree to cover some of the buyer’s closing costs to make the deal more appealing.

But with new construction homes, builders don’t operate that way. They see their homes as “brand new” products that don’t need additional incentives. As a result, you—the buyer—are usually on the hook for the full amount of closing costs.

2. Builder-Specific Fees

Buying a new construction home often comes with additional fees that existing home purchases don’t have. Some of these include:

- Builder’s Administrative Fees – Builders charge administrative fees to cover their operational costs.
- HOA Initiation Fees – If the home is in a community with a homeowners’ association (HOA), there may be a hefty upfront fee.
- Capital Contribution Fees – Some communities require buyers to contribute to communal improvements, like landscaping or amenities.

3. Mandatory Use of Builder's Preferred Lender

Many builders strongly encourage (or even require) buyers to use their preferred lender and title company. They do this to streamline the process, but it also means less negotiating power for you when it comes to closing costs.

While the builder’s lender might offer some incentives—such as covering some loan-related fees—you could still end up paying more in other areas, like title insurance or escrow fees.

Specific Closing Costs to Expect with a New Construction Home

To give you a better idea of what to budget for, here’s a breakdown of the most common closing costs in a new construction home purchase:

Loan-Related Fees

- Origination Fee – Charged by your lender to process your loan.
- Discount Points – If you choose to buy down your interest rate, this will be an additional cost.
- Appraisal Fee – Determines the fair market value of the home.

Title and Escrow Fees

- Title Search and Title Insurance – Protects you and your lender from ownership disputes.
- Escrow Fees – Covers the third-party service managing your closing process.

Builder-Specific Fees

- HOA & Capital Contribution Fees – If applicable, can be a significant cost.
- Builder Warranty Fees – Some builders charge for extended warranties beyond the standard coverage.
- Infrastructure or Utility Fees – If the community is brand new, you may pay a fee for things like water and sewer hookups.

Prepaid Expenses

- Property Taxes – You might need to prepay a portion of your property taxes upfront.
- Homeowners Insurance – Lenders usually require at least one year of prepaid insurance at closing.

Can You Negotiate Closing Costs on a New Construction Home?

Yes, but it’s not always easy. Builders have less flexibility on price reductions (since they don’t want to set lower price precedents in their communities), but they might be willing to offer other incentives.

How to Lower Your Closing Costs on a New Construction Home

1. Ask for Builder Incentives – Many builders offer closing cost credits or upgrades if you use their lender.
2. Shop Around for a Lender – Even if the builder has a preferred lender, get an estimate from outside lenders to compare rates and closing costs.
3. Negotiate the Title and Escrow Fees – Some third-party title companies charge lower fees than the builder’s preferred title company.
4. Request Seller Concessions – While rare, some builders—especially in a slow market—might be willing to chip in for closing costs.

Are New Construction Homes Worth the Higher Closing Costs?

If new construction homes come with higher closing costs, you might be wondering if they’re worth it.

Pros of Buying a New Construction Home

- Brand New Everything – No need to worry about repairs or renovations.
- Modern Features – New homes come with energy-efficient appliances, smart home technology, and open floorplans.
- Builder Warranties – Most builders offer at least a 1-year warranty covering defects or issues.

Cons of Buying a New Construction Home

- Higher Upfront Costs – Closing costs tend to be higher.
- Longer Wait Times – If you're buying before construction is complete, you could wait months before moving in.
- HOA and Community Fees – Some new communities have steep HOA fees or additional assessments.

If you love the idea of customizing your home and having everything brand new, then the extra closing costs might not seem like such a big deal. However, if you're on a tight budget, they can be a significant factor to consider.

Final Thoughts

So, will you pay different closing costs for a new construction home? Yes, almost always.

New construction homes tend to come with higher closing costs due to builder fees, HOA contributions, and limited negotiation opportunities. However, they also come with brand-new everything, builder warranties, and modern features that might make the extra cost worth it.

If you're considering a new construction home, it's crucial to understand the fees upfront, negotiate when possible, and shop around for the best lender and title company.

At the end of the day, buying a home—whether new or resale—is about finding the right fit for you and your financial situation. If you go into the process with open eyes and a solid budget, you’ll be well-prepared to handle those closing costs like a pro.