Down payment timing depends on your builder's schedule and your loan type

For a new construction home, your down payment does not come due all at once on closing day. Instead, you typically make multiple payments at different stages of construction. The first payment—usually 5 to 10 percent of the purchase price—is often due when you sign the purchase agreement, sometimes called the earnest money deposit. Additional payments then come due as the builder reaches specific construction milestones: foundation completion, framing, roof installation, and final inspection. The final payment, which brings your total down payment to the agreed-upon amount (usually 10 to 20 percent), is due at closing when you receive the keys.

The exact schedule varies by builder and region. Some builders require payments at every major phase; others cluster them into fewer, larger payments. Your purchase agreement spells out the exact dates or construction milestones tied to each payment. If you are financing through a lender, the lender may also impose its own requirements about when funds must be in escrow or held by the title company. If you are paying cash, you have more flexibility, but the builder still controls the payment schedule outlined in your contract.

Key Takeaways

  • Your first down payment (earnest money) is typically due when you sign the purchase agreement, not months later at closing.
  • Builders schedule additional down payments to coincide with construction milestones like foundation, framing, and roof completion.
  • The total down payment is split across multiple dates in your purchase agreement; read that document carefully to know what you owe and when.
  • If you are financing, your lender may require funds to be held in escrow by a title company rather than paid directly to the builder.
  • Missing a scheduled payment can trigger contract penalties or allow the builder to cancel the sale and keep your earnest money.

Earnest money due at contract signing

The first payment you make is earnest money, which shows the builder you are serious about the purchase. This is typically 1 to 3 percent of the purchase price and is due within a few days of signing the purchase agreement—often by the end of the week or within 10 days. The earnest money is held by a third party, usually the title company or a real estate attorney, not by the builder. If the deal closes, this money is credited toward your down payment. If you back out for a reason not covered by your contract contingencies, the builder keeps it.

Earnest money is not optional and not negotiable with most builders. It is a standard part of any new construction contract. The amount and due date are written into your purchase agreement before you sign. If you cannot pay it by the deadline, you are in breach of contract, and the builder can cancel the sale. Make sure you have this money available before you sign anything.

Milestone payments during construction

After earnest money, the builder schedules additional down payments tied to construction progress. A typical schedule might look like this: 5 percent due at foundation completion, 5 percent at framing, 5 percent at roof completion, and the final 5 percent at closing. Some builders use different milestones or different percentages, so your contract may not match this example exactly. The key is that each payment is tied to a specific stage of work, not to a calendar date.

The builder is responsible for notifying you when each milestone is reached and when payment is due. However, you should track the construction progress yourself and ask the builder in writing when you can expect the next payment notice. Payments are typically due within 5 to 10 days of the milestone being reached. If you miss a payment deadline, the builder can stop work, charge you a late fee, or cancel the contract. Some builders allow a short grace period; others do not. Check your purchase agreement for the exact terms.

If you are financing, your lender may require that milestone payments be held in escrow by the title company rather than paid directly to the builder. In that case, you authorize the title company to release funds to the builder when each milestone is certified. This protects you by ensuring the builder has actually completed the work before receiving payment. It also protects the lender by ensuring the home is being built to spec.

Final payment at closing

The last portion of your down payment is due at closing, when you sign the final paperwork and receive the keys. This is typically the largest single payment and brings your total down payment to the agreed-upon percentage (usually 10 to 20 percent of the purchase price). At closing, your lender wires the mortgage funds to the title company, and the title company uses those funds plus your final down payment to pay off the builder's construction loan and transfer ownership to you.

The exact amount due at closing is calculated by subtracting all previous down payments from your total down payment obligation. For example, if your total down payment is 20 percent and you have already paid 15 percent in earnest money and milestone payments, you owe 5 percent at closing. Your closing disclosure, which you receive at least three days before closing, will show this amount in detail. Do not assume the amount; verify it against your purchase agreement and closing disclosure.

What happens if you miss a payment

Missing a scheduled down payment is a serious breach of your purchase agreement. The builder can stop construction immediately, charge you a late fee (typically 1 to 2 percent of the payment amount per month), or cancel the contract entirely. If the contract is cancelled, you lose your earnest money and any previous payments, and the builder keeps the home to sell to someone else. You have no legal claim to the home once the contract is cancelled.

If you know you will miss a payment, contact the builder in writing as soon as possible and ask for a short extension. Some builders will grant a few days' grace if you communicate early. Others will not. Do not assume an extension will be granted; get it in writing before the deadline passes. If you are having financial difficulty, talk to your lender about whether you can adjust your down payment schedule or postpone closing. Some lenders will work with you if you ask before a problem occurs.

How construction delays affect payment timing

If the builder falls behind schedule, your payment milestones may shift. For example, if framing is delayed by two months, the payment tied to framing completion is also delayed by two months. This is usually not a problem for you—you simply pay when the work is done, not when you originally expected. However, if the delay is long enough, it may affect your mortgage lock-in period or your ability to move into the home by a certain date. Review your purchase agreement to see whether the builder is liable for delays and what your remedies are if closing is pushed back significantly.

Some purchase agreements include a "time is of the essence" clause, which means the builder must close by a certain date or you can cancel and recover your earnest money. Others allow the builder to delay indefinitely as long as they are still working. Know which type of clause is in your contract. If the builder is chronically behind and you want out, you may have a legal right to cancel, but only if your contract says so.

Down payment timing with different financing types

If you are getting a conventional mortgage, your lender will require that down payments be held in escrow and released only when construction milestones are certified. This is standard and protects both you and the lender. If you are getting an FHA loan, the same rule applies, though FHA has additional requirements about the builder's warranty and the home's condition at closing. If you are getting a VA loan, VA also requires escrow for down payments and has strict rules about what the builder can charge you.

If you are paying cash, you have more flexibility. You can negotiate the payment schedule directly with the builder. However, most builders still require earnest money upfront and milestone payments during construction. Even cash buyers do not typically pay the full amount until closing. Paying in full before closing leaves you with no leverage if the builder fails to complete the home or if there are defects at move-in.

Frequently Asked Questions

Can I negotiate the down payment schedule in my purchase agreement?

Yes, before you sign. Once the agreement is signed, the payment schedule is locked in. If you need a different schedule, ask the builder before signing and get any changes in writing as part of the agreement. Builders are usually willing to negotiate earnest money amounts and milestone payment dates if you ask early.

What if the builder goes bankrupt before my home is finished?

Your earnest money and down payments may be at risk. If the builder's lender forecloses on the property, your payments go toward paying off the construction loan, not toward your home. This is why some states require builders to post a bond or hold down payments in a separate escrow account. Check your state's new construction laws and ask your real estate attorney whether your down payments are protected.

Do I have to pay all my down payment before closing?

No. Your down payment is split across multiple dates: earnest money at signing, milestone payments during construction, and the final payment at closing. You do not pay the full amount until the day you close and receive the keys. Your lender will not release mortgage funds until you have paid your full down payment obligation.

Can the builder change the payment schedule after I sign the contract?

No, not without your written consent. The payment schedule is part of your purchase agreement and is binding on both you and the builder. If the builder tries to change it, you can refuse and hold them to the original terms. If they refuse to proceed under the original terms, that may give you grounds to cancel and recover your earnest money.

What if I do not have all the down payment money ready by closing?

You cannot close without it. Your lender will not release mortgage funds until you have deposited your full down payment with the title company. If you are short, you must either postpone closing, ask the builder for a credit (which they can refuse), or find another source of funds. Borrowing the down payment from a friend or family member is allowed, but the lender may require a gift letter stating it does not need to be repaid.