Profile picture for joshh83

Do New Construction Builders typically pay or help with paying closing costs?

I'm located in the burbs of Minneapolis and I'm looking to buy a new construction house at around $240,000 and should have the $48,000 to pay the 20% down by the end of the construction process at the time of closing. But if I have to pay $5,000 to $6,000 more for closing costs, that might affect my ability to pay all 20% down. I want to avoid paying PMI, and if the builder can pay atleast 1/2 of my closing costs or more, I should be in the clear. 

Just wanted to know, how typical do builders pay for closing costs, how much they pay as I have read some builders will pay as much as 3% of home price to closing costs. My realtor is out of town until our meeting with the builder next week, and I can't get answers from her now.

If they do not pay closing costs, I may forced to decrease a few upgrades (wood floors, vaulted ceilings, or fireplace etc) in order to put 20% down and have enough for closing costs, I would think they would lose profit if I ended up having to take away some of my upgrades. Thanks!
  • April 08 2013 - Maple Grove
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Answers (6)

Profile picture for dgupta1
Hello JoshH;
Thanks for visiting Zillow.  Yes it is pretty typical that Builder will  pay closing costs. The Hook is that you have to commit to get financing from their mortgage. In a way it may be alright.  We do it all the time since 1991. Or creative financing  will do it too. You don't have to pay 20% down to save on Mortg. Insurance. You can avoid MI expense even with 5% down. 
  • April 08 2013
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Profile picture for JoshBarnettREIB
How many concessions have you already asked for and are you trying to change what has already been agreed upon?

Your Realtor will be able to help you with your specific situation and you should already have gone over all of this prior to even looking for a new home.  

Get with your Realtor and don't lose your earnest money by changing an already agreed upon transaction.  
  • April 08 2013
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Builders have no problem paying closing costs. Heck they will do the max allowed by conventional if you want. I just did this with my buyer on a new construction house. Sometimes they will give beef about appraisal issues (and sometimes it is warrantied) which is the only concern. 

THE KICKER is whether they just wrap these into the loan amount or not. If you can negotiate upfront before signing anything it will be possible to hopefully get the builder to cover half of the costs like you said. This is without changing the sales price. 

You better do it then though, because once the build starts you lose all leverage. At that time if you ask for $5,000 in closing costs the builder will still do it, but they will just add the $5,000 to purchase price so you essentially are FINANCING the closing costs. 

Make sense? Good Luck!

~Chris
  • April 08 2013
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Profile picture for wetdawgs
In  my experience, builders don't tend to contribute to closing costs unless you go with their lender (often not a good idea).    The profit they miss by not installing upgrades will be profit they retain by not paying for closing costs.

  • April 08 2013
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Remember, everything is negotiable at some point!  Depending on how "hot" this new development is, the builder will often times offer to pay for closing costs over lowering the sales price.  Use this to your advantage!  As mentioned previously, using a buyers agent that is 100% commited to your best interest will go a long way!  Good luck!

  • April 08 2013
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Profile picture for Marlene Weaver
This is something your realtor can definitely negotiate for you. If you don't have a realtor, you should.  When you work with a home builder, keep in mind the sales rep you are dealing with is working for the builder, though he or she seems to be working for you, their best interest is getting the most for the builder.  Therefore you should definitely work with a buyers agent, a buyers agent works for you on your behalf and has a fiduciary responsibility to you.
  • April 08 2013
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