Closing Costs On New Construction: What to Expect and How to Prepare

When purchasing a newly built home, the excitement of moving into a brand-new space comes with financial considerations beyond the purchase price. One of the most significant costs that homebuyers should prepare for is closing costs on new construction. These fees cover a range of expenses associated with finalizing the sale, from lender charges to title and attorney fees.

If you’re considering an Ashton Woods home, understanding closing costs on a new build will help you budget effectively and ensure a smooth transition to homeownership. Below, we explore what to expect and how to prepare for new build closing costs in a way that ensures you’re financially ready for your new home.

Understanding Closing Costs on a New Build

Closing costs are the various fees paid at the conclusion of a real estate transaction. While these costs exist in every home purchase, closing costs on new construction often come with additional expenses unique to newly built homes. From builder-specific fees to prepaid expenses, understanding these costs can help buyers plan ahead and avoid unexpected financial surprises.

Unique Costs for New Construction Homes

Unlike resale properties, closing costs on new construction may include builder-specific fees. For example, buyers who opt for a premium lot may see that cost factored into their closing expenses. Homeowners Association (HOA) fees are another common charge, as many new developments are part of a managed community that requires annual dues. Builders may also charge administrative or processing fees, which can range from $100 to $1,000.

Additionally, new build closing costs often include prepaid expenses. Property taxes and homeowners insurance must typically be paid upfront at closing. Lenders usually require buyers to prepay six months to a year of property taxes. Similarly, the first year’s homeowners insurance premium is usually due at closing to ensure the home is protected from day one. Some lenders also establish an escrow account, requiring an initial deposit to cover future tax and insurance payments.

The True Cost of Closing on a New Construction Home

Many homebuyers underestimate just how much closing costs on a new build can add to their bottom line. Generally, these costs range from 2% to 5% of the home’s purchase price. This means that on a $400,000 home, closing costs could be anywhere from $8,000 to $20,000. That’s a significant amount to account for, making it essential to know where these costs originate and how to prepare for them.

Among the most common new build closing costs are lender-related fees. When financing a home, your lender will charge for services such as loan origination, which can be 0.5% to 1% of the loan amount. Additionally, a home appraisal—often required for mortgage approval—typically costs between $300 and $600. These lender fees are standard in any home transaction, but they can add up quickly in a new construction purchase.

Title and attorney fees also play a role in closing costs on a new build. A title search ensures that the property is free from ownership disputes, typically costing between $200 and $400. Title insurance, which protects both the lender and the buyer from title-related legal issues, usually ranges from 0.5% to 1% of the home’s purchase price. Some states require an attorney to oversee the closing process, which can add $500 to $1,500 in legal fees.

How to Prepare for Closing Costs on New Construction

Estimating Your Costs Early

Being proactive is key when budgeting for closing costs on a new build. Start by requesting a Loan Estimate from your lender. This document outlines expected closing costs, helping you avoid last-minute surprises. Additionally, researching standard closing costs in your area can give you a better idea of what to expect.

Exploring Builder Incentives

Some builders offer incentives to help offset closing costs on a new build. These promotions may include closing cost credits, interest rate reductions, or even waived fees when using the builder’s preferred lender. It’s worth asking about these options, as they can lead to significant savings.

Accounting for Additional Expenses

Beyond closing costs on new construction, homebuyers should also plan for other expenses that come with moving into a new home. Furniture, appliances, utility setup fees, and landscaping are just a few additional costs that may arise after closing. Having a financial cushion can help make the transition into your new home as smooth as possible.

The Bottom Line

Purchasing a new construction home is an exciting milestone, but it’s essential to be financially prepared. Understanding closing costs on new construction can help you plan ahead and budget effectively. While costs vary, being informed about lender fees, title and attorney charges, builder-specific expenses, and prepaid costs will ensure no surprises at closing.

At Ashton Woods, we strive to make the homebuying experience seamless from start to finish. Whether selecting one of our thoughtfully curated AW Collections® or personalizing your home from the ground up, our team is here to guide you through every step—including planning for new build closing costs. From understanding financing options to finalizing the details of your dream home, we’re with you every step of the way. Let us help you navigate the journey to homeownership with confidence.

Closing Costs Glossary:

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2. Loan Origination Fee – A fee charged by the lender to process and underwrite your mortgage. It’s usually a percentage of the loan amount.

3. Appraisal Fee – The cost of having a professional appraiser assess the value of your new home to ensure it matches the loan amount.
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5. Title Insurance – A policy that protects both the buyer and the lender from any issues with the home’s title, such as liens or ownership disputes.
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7. Attorney Fees – In some states, an attorney is required to oversee the closing process. Their fees cover document preparation and legal oversight.
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9. Escrow Fees – Fees paid to the escrow company or closing agent who handles the transfer of funds and documents between the buyer and seller.
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11. Prepaid Costs – Upfront payments for property taxes, homeowners insurance, and interest that are required before closing.
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13. Homeowners Association (HOA) Fees – If your new home is in a community with an HOA, you may need to pay an initial fee at closing.
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15. Recording Fees – A charge from the local government to officially record your property’s deed and mortgage documents.
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17. Builder-Specific Closing Costs – Additional fees unique to new construction, such as inspection fees, utility setup costs, or builder admin fees.

Disclaimer

Ashton Woods is not a mortgage lender or financial broker. This blog is intended for informational purposes only and should not be considered financial or legal advice. Homebuyers should consult with their lender, attorney, or financial advisor for specific guidance regarding closing costs and mortgage financing.