You typically pay your down payment in stages during construction, not all at once at closing like you would with an existing home

With new construction, the builder collects your down payment in multiple installments tied to construction milestones, not at the end. You might pay 5% when you sign the purchase agreement, another 10% when framing is complete, and the final amount at closing. The exact schedule depends on your builder's requirements and your loan type — some builders demand more upfront, others spread payments across more phases. Your purchase agreement will spell out the exact percentages and timing before you sign anything.

This is different from buying an existing home, where you typically hand over your full down payment at the closing table. With new construction, the builder is using your money to fund the actual building process, so they want it in pieces as the work progresses.

Key Takeaways

  • New construction down payments are split into multiple installments tied to construction phases, not paid in full at closing.
  • Your purchase agreement lists the exact payment schedule, percentages, and dates before you commit to anything.
  • Typical timing includes an initial payment when you sign, mid-construction payments at framing or drywall, and a final payment at closing.
  • Your lender controls how much you can pay upfront — some require you to hold back funds until the home is substantially complete.
  • If construction delays happen, your payment schedule may shift, but your agreement should specify what happens in that scenario.

The typical payment schedule during construction phases

Most builders follow a pattern of collecting down payment in three to five chunks. The first payment — often 5% to 10% of the purchase price — comes when you sign the purchase agreement. This secures your lot and locks in the price. The second payment usually arrives when the builder reaches a major milestone: framing complete, roof on, or drywall hung. A third payment might come when the home is "substantially complete" (meaning it's livable, though final touches may still be happening). The final payment is due at closing, when you get the keys.

Some builders collect more aggressively — asking for 15% or 20% upfront — while others spread payments across more phases. A few builders ask for smaller payments monthly as work progresses. Your purchase agreement will show the exact percentages and dates. If the schedule isn't clear, ask the builder's sales agent to write it out before you sign.

The timing of each payment is usually tied to the builder's construction schedule, not a fixed calendar date. If framing takes longer than expected, your second payment date moves. Your agreement should say whether dates are firm or subject to construction progress.

How your mortgage lender affects when you pay

Your lender has rules about how much of your down payment you can hand over before closing. Most lenders won't let you pay more than 50% of your down payment until the home is substantially complete — meaning the roof is on, windows are in, and the interior is mostly finished. This protects the lender because if the builder goes bankrupt mid-project, your money is at risk.

Some lenders require you to hold back a portion of your down payment until after the final walkthrough and closing. This is called a holdback or retainage. You'll pay it at closing along with your remaining down payment and closing costs. Ask your lender upfront what their rules are, because this affects how much cash you need to have ready at each stage.

If you're using an FHA loan or VA loan, the rules are stricter. FHA typically requires the home to be 50% complete before you pay more than 5% down. VA loans have similar restrictions. Conventional loans are usually more flexible, but still require substantial completion before releasing the bulk of your down payment.

What happens if construction delays push back your payment dates

Construction delays are common — weather, supply chain issues, labor shortages, or inspections can all push timelines. Your purchase agreement should specify what happens to your payment schedule if the builder misses a milestone date. Some agreements say payments shift automatically with the new construction timeline. Others say you have the right to delay your payment if the builder is behind schedule.

If your agreement doesn't address delays, you could end up in a dispute about whether you owe money on a date when construction hasn't actually reached the promised stage. Before you sign, ask the builder to clarify: do payment dates move if construction is delayed, or do you pay on the calendar date regardless? Get the answer in writing in your purchase agreement.

If the builder is significantly behind — say, six months or more — you may have the right to cancel the contract and get your down payment back, depending on your state's laws and what your agreement says. This is another reason to read the cancellation clause carefully before signing.

Protecting your down payment during construction

Your down payment money should go into an escrow account held by a third party — usually the builder's attorney, a title company, or an escrow agent. You should never hand cash directly to the builder. The escrow agent releases the money to the builder only when the milestone is reached and documented. This protects you if the builder goes out of business or fails to complete the work.

Ask the builder who holds the escrow account and request the escrow agreement in writing. You should be able to verify that your money is actually in escrow and hasn't been released early. Some builders try to release escrow funds before construction actually reaches the milestone — this is a red flag.

If the builder goes bankrupt before your home is finished, your down payment in escrow is usually protected, but money already released to the builder may be lost. This is another reason lenders require you to hold back a portion of your down payment until the home is substantially complete.

Down payment timing if you're building on your own lot

If you own the land and are hiring a builder directly (not buying from a production builder), the payment schedule works differently. You might pay the builder a deposit upfront, then make progress payments as each phase completes — foundation, framing, rough-in, drywall, finishing. The schedule depends entirely on your contract with the builder.

With a custom builder, you have more negotiating power over the payment schedule. You can push back on aggressive upfront payments and ask for smaller, more frequent installments tied to specific work completion. Get the payment schedule in your written contract before work starts, and make sure it specifies what happens if the builder abandons the project or goes bankrupt.

If you're financing the construction with a construction loan (a short-term loan that covers building costs), the lender will disburse money directly to the builder at each milestone, not to you. You won't be writing checks to the builder yourself — the lender controls the money flow. This is actually safer for you because the lender inspects the work before releasing funds.

What to ask the builder before you commit to a payment schedule

Before you sign a purchase agreement, get answers to these questions in writing: What are the exact payment amounts and dates? What construction milestone triggers each payment? Who holds the escrow account? What happens if construction is delayed — do payment dates move? What happens if the builder goes bankrupt — is your down payment protected? Can you cancel the contract and get your money back if the builder misses a deadline by more than a certain number of days?

Also ask your lender: How much of my down payment can I pay before closing? Do you require a holdback? Will you inspect the home before releasing funds? What happens if the builder goes bankrupt — will you still fund my mortgage?

Getting these answers upfront prevents surprises later. If the builder won't answer clearly or won't put the payment schedule in writing, that's a warning sign. A reputable builder will have a standard purchase agreement that spells all of this out.

Frequently Asked Questions

Can I get my down payment back if the builder doesn't finish the home?

It depends on your purchase agreement and state law. If the builder abandons the project, you may have the right to cancel and recover your down payment from escrow. If the builder goes bankrupt, your escrow funds are usually protected, but money already released to the builder may be lost. Your agreement should specify what happens in these scenarios — if it doesn't, ask the builder to add language protecting you.

What if I can't afford to pay the down payment installments on schedule?

Talk to your lender about a construction loan or a bridge loan that can cover your down payment installments until closing. Some lenders will let you roll unpaid down payment amounts into your mortgage, though this increases your loan amount and monthly payment. Don't miss a payment deadline without notifying the builder — you could lose your contract and your down payment.

Do I pay property taxes during construction?

Usually not. Property taxes typically don't start until the home is substantially complete and you take possession. Your purchase agreement should clarify when you become responsible for property taxes and homeowners insurance. Some builders require you to carry insurance once you've paid a certain percentage of the down payment.

Can the builder increase the price after I've paid my down payment?

Your purchase agreement should lock in the price. However, builders often charge extra for upgrades, changes to the plan, or site-specific costs (like grading or utilities). These are separate from your down payment. Make sure your agreement specifies what's included in the base price and what costs extra before you sign.

What if the builder wants me to pay more than my lender allows?

Tell the builder your lender's rules about down payment timing. Most builders work with lenders regularly and know the restrictions. If the builder insists on a payment schedule your lender won't accept, you may need to find a different builder or a different lender. Don't agree to pay more upfront than your lender will reimburse at closing — you'll be out of pocket.