Buying a new construction home holds obvious appeal: you’re the first occupant, there’s no wear‑and‑tear, and you get to enjoy modern layouts, efficient systems, and potentially customize finishes.
In supply‑constrained markets like California, new construction can also open doors when existing‑home inventory is thin and bidding wars drive up prices. Recent market forecasts suggest home sales in California could grow about 9 % in 2025 as interest rates stabilize around 6 %.
At the same time, the state still faces a housing shortage, so buyers must act quickly and strategically. This guide demystifies the process of buying a new construction home, explains key steps and pitfalls, and highlights California‑specific considerations, including disclosure requirements and new housing laws taking effect in 2025.
The Process of Buying a New Build Home
New construction is different from purchasing a resale home. You’re often committing to a property before it’s built, working directly with a builder and making decisions that affect design, timeline, and cost.
The following overview explains how the process of buying a new build home works and what to expect.
Choose Your Type of New Construction
New homes come in several categories. Tract homes are built in large developments; designs are repeated and options are limited, but prices tend to be lower. Spec homes are houses that the builder constructs without a buyer lined up; these are move‑in ready, but you don’t get to choose materials.
Custom homes let you control every aspect of design and finishes, but are the most expensive and time‑consuming. Some builders also offer semi‑custom homes with predetermined floor plans, but the ability to pick finishes.
Decide how much customization you need and how quickly you want to move; production homes can be built in four to six months, whereas custom homes often take 10–16 months.
Budgeting, Deposits, and Financing
Buying new construction usually requires a builder’s deposit. In competitive markets, this deposit can range from $3,000 to 20% of the purchase price. It may or may not be refundable, so read the contract carefully.
Some builders offer incentives if you use their preferred lender, but that doesn’t mean you should accept the first offer. Mortgage experts recommend shopping for interest rates from at least five lenders. Even a fraction of a percentage point can save thousands of dollars over 30 years.
When evaluating new construction home loans in California, compare options such as end loans from traditional lenders and construction loans in California that convert to permanent mortgages. Keep in mind that mortgage rates remain elevated; plan your budget accordingly.
Pre‑Contract Research
1. Educate yourself. Before touring model homes, read guides about new construction and talk to homeowners who have built recently. A lack of strategy and education can cost you tens of thousands of dollars.
2. Research the builder. Interview past customers, look up complaints with the Better Business Bureau, and search for news about lawsuits or construction defects. Most expert advice emphasizes verifying membership in professional organizations, reading online reviews, and visiting previously completed projects. We also suggest connecting with current residents on social media and asking the builder about future development plans. A reputable builder should answer questions openly and have a record of delivering quality homes.
3. Review the community. Understand the development’s homeowners’ association (HOA) rules, amenities, taxes, and how the neighborhood will evolve. In California, pay attention to whether the site is near transit corridors because laws like AB 2553 expand the definition of major transit stops and reduce traffic impact fees for developments near bus routes that operate every 20 minutes.
Signing the Purchase Agreement
Once you choose a home and builder, you’ll sign a contract. This agreement outlines the lot, floor plan, standard features, timeline, allowances for upgrades, and the deposit structure. Make sure everything is in writing. If the sales agent promises an upgrade or repair, note it in the contract.
Ask about change orders: what is the process for adding or altering features after signing? Builders may allow changes within a certain window but charge fees for late alterations. It’s also critical to understand contingencies—does the contract allow you to cancel if financing falls through or if construction is delayed beyond a specified date?
Construction and Inspections
New construction homes progress through stages: site preparation, foundation, framing, major systems (HVAC, plumbing, electric), interior finishes, and exterior finishes. On average, constructing a house takes about seven months, but pre‑construction planning and permitting often extend the timeline to a year.
Custom builds take longer, and owner‑built homes can require 12 months or more. Weather, supply shortages, and change orders can cause delays.
Hire a third‑party inspector to check the property at key points (pre‑drywall, before closing). Home inspections are essential even for new construction because mistakes happen.
Inspectors often find issues like missing insulation, faulty plumbing, or improper electrical work that builders need to correct before closing. Plan a final walkthrough to verify that all agreed‑upon upgrades and punch‑list items are completed.
Closing and Move‑In
As construction nears completion, your lender will schedule an appraisal and underwriting. The builder obtains a certificate of occupancy from the local jurisdiction. You’ll receive a settlement statement detailing closing costs and final payments.
Note that closing schedules can slip due to inspection delays, supply chain issues, or weather. While builders might quote a completion date, expect potential delays and maintain flexible housing arrangements.
Key Steps and Tips for Buying a New Construction Home
Below are practical tips and steps to ensure a smooth purchase of new construction homes while avoiding common mistakes. These tips incorporate strategies for buyers in California as well as general advice.
1. Educate Yourself on the Process
Understanding the process protects your wallet. Without a strategy or the right team, you could overpay. Read about construction stages, learn how contracts work, and familiarize yourself with local building codes. In California, statewide energy and seismic codes are strict; homes must meet standards for structural integrity, insulation, and fire resistance.
The state has also adopted ambitious housing goals. Senate Bill 450 amends SB 9 by requiring local governments to approve lot‑split projects within 60 days and prevents cities from imposing more restrictive standards on these projects. Knowing these rules helps you understand what’s feasible on your property.
2. Shop for a Mortgage Early
Get pre‑approved before visiting communities. Mortgage shopping is critical; We advise asking at least five lenders for rates and options because small rate differences can save tens of thousands. Consider whether you’ll need a construction loan (disbursed as the home is built) or an end loan (used for a completed home).
In California, lenders may offer specialized programs such as interest‑rate locks for longer construction periods or combined construction‑to‑permanent loans. Evaluate closing-cost incentives from the builder’s preferred lender against independent offers, including no-closing-cost loans in California, where appropriate.
3. Use a Buyer’s Agent
You might assume that dealing directly with the builder saves money; however, the builder’s sales representative works for the builder. Having an experienced buyer’s agent is one of the most important things you can do.
Builders typically pay the agent’s commission, so there’s little cost to you. A good agent will negotiate upgrades, ensure the contract protects your interests, and hold the builder accountable for promised features.
They can also interpret California’s new laws—such as provisions in AB 2729 that extend building entitlements for 18 months and SB 937 that defers impact fees until the certificate of occupancy—and explain how these might affect your timeline or pricing.
4. Research and Choose a Reputable Builder
Investigate the builder’s track record: speak with past buyers, search for lawsuits, check membership with professional associations, and visit older communities for signs of quality. Online reviews and neighbourhood forums offer candid feedback.
Ask the builder detailed questions:
- What is included in the base price?
- What are typical upgrade costs? Who oversees construction?
- What is the timeline for each stage?
- Do they offer a third‑party warranty or in‑house coverage?
Well‑established builders should provide written answers.
5. Understand the Contract and Change Orders
Contracts for new construction are lengthy and favor the builder. Work with your agent and possibly a real estate attorney to review the purchase agreement. Make sure allowances for flooring, appliances, and fixtures are realistic; otherwise, upgrades can quickly inflate costs.
Clarify timelines, payment schedules, penalties for delays, and cancellation rights. When you make change orders, ask how they will affect the delivery date and price. Keep copies of all change documents and ensure they’re incorporated into the contract.
6. Plan for Delays and Budget Overruns
Even well-managed projects can run into delays due to weather, labor shortages, or permitting issues. The average construction period is about seven months, but it can extend to a year when planning and permitting are included. Custom homes can take 10–16 months.
Build a contingency fund for temporary housing, storage, or rental costs if your move‑in date slips. Also, budget for unexpected costs such as landscaping, fencing, window coverings, and property taxes—items often not included in the base price.
7. Schedule Third‑Party Inspections
Don’t skip inspections. Mistakes happen, and a home inspection is essential. Schedule inspections before drywall, before the builder’s final walk‑through, and before closing. Inspectors can identify missing flashing, miswired outlets, or foundation cracks.
Provide the inspection report to the builder and require corrections before closing. In California, local codes and seismic requirements are stringent; a professional inspector can verify compliance.
8. Review Warranties and Walk‑Throughs
Builders typically provide a warranty covering workmanship and major systems. Coverage varies by builder and may involve third‑party companies. Ask what is covered (structural elements, plumbing, electrical systems) and for how long.
Many builders follow a 1‑2‑10 format: one year for workmanship, two years for systems, and 10 years for structural defects. Clarify procedures for submitting warranty claims and ensure the contract doesn’t waive your rights under California law.
During the final walk‑through, compile a punch list of cosmetic defects, missing hardware, and incomplete work, and make sure they are addressed before closing.
Dos and Don’ts of Buying New Construction
This section highlights practical dos and don’ts of buying new construction. Use these as a quick checklist during your purchase journey.
Dos (What You Should Do)
- Do get pre‑approved and set a realistic budget. Secure financing early and include a contingency fund for upgrades and unforeseen expenses.
- Do hire a buyer’s agent. Professional representation is vital. Builders pay the commission, and the agent works for your interests.
- Do research the builder and community. Check the builder’s reputation, ask about future phases, and talk to current residents.
- Do read and understand the contract. Ensure allowances are sufficient and that change orders are clearly defined.
- Do plan inspections. Hire inspectors at multiple stages to catch construction errors.
- Do understand your deposit and warranty. Deposits can be substantial; know whether they’re refundable. Clarify warranty coverage.
- Do factor in California disclosures and laws. Ask for the Natural Hazard Disclosure Statement, which details whether the property is in a flood, fire, or earthquake zone. New laws like SB 450 and AB 2553 may affect permitting and fees.
Don’ts (Mistakes to Avoid)
- Don’t rely on the builder’s salesperson. They represent the builder and may not point out contract provisions that disadvantage you.
- Don’t skip the mortgage shopping process. Builders’ lenders sometimes offer incentives, but independent lenders might provide better rates.
- Don’t assume everything in the model home is included. Model homes showcase upgrades; list what’s standard and what costs extra.
- Don’t over‑customize beyond market norms. While customizing can create your dream home, over‑personalization may hinder resale value. Evaluate options carefully.
- Don’t ignore the future of the neighborhood. Consider local infrastructure, schools, planned development, and community amenities.
- Don’t underestimate delays. Prepare for schedule changes and have backup housing.
Financing and New Construction Home Loans in California
Financing a new build differs from buying an existing home. Many buyers rely on conventional loans in California, but some projects require construction loans that convert to permanent mortgages once the home is complete.
Here’s how to navigate financing for new construction home loans in California.
Construction Loans vs. End‑Loans
For homes not yet built, you may need a construction loan. This short‑term financing covers building costs and typically disburses funds at different stages. Once construction is complete, the loan converts to a permanent mortgage.
Construction loans often have higher rates than standard mortgages, so compare them carefully. For spec homes or nearly finished tract homes, an end‑loan (traditional mortgage) may suffice.
Working with Builder’s Preferred Lenders
Builders often partner with lenders and offer incentives like closing‑cost credits or interest‑rate locks. Evaluate these offers against market rates. The builder’s preferred lender might be convenient, but independent lenders could provide lower rates or more flexible terms.
California‑Specific Programs and Fees
California occasionally offers down‑payment assistance and first‑time homebuyer programs that apply to new construction. Additionally, new laws may affect your costs. For example, SB 937 allows developers to defer certain impact fees until the certificate of occupancy is issued, reducing carrying costs.
AB 2553 reduces vehicle traffic impact fees near major transit stops and broadens the definition of transit stops to include bus routes with 20‑minute headways. Ask your lender how these laws might lower your closing costs.
Regional Examples: Los Angeles & Orange County
In high‑demand regions like Los Angeles and Orange County, new construction homes often sit on smaller lots and come with premium prices. These areas may also be subject to local zoning overlays, Mello‑Roos assessments, and higher permit fees.
When buying a new home in Los Angeles / Orange County, budget for these extra costs and consult a local mortgage broker who understands regional nuances.
Negotiation, Inspections, and Closing on New Builds
Proper negotiation and oversight can save money and prevent headaches when buying a new build. This section answers common questions like “can you negotiate on new construction homes” and “when do you close on a new construction home.”
Negotiating with Builders
Builders rarely drop base prices because doing so can reduce comps for future sales in the development. Instead, negotiate for upgrades, credits, or closing‑cost assistance. Negotiating for “things” rather than a lower price is often more successful.
Examples include free appliance packages, higher‑end flooring, or covered closing costs. If you’re one of the first buyers in a new community, you may have more leverage because the builder is keen to start sales.
Don’t sign anything without your agent reviewing it. Experienced agents know which upgrades have the best return and can identify builder incentives that look generous but may not be worth the cost. Always get promises in writing.
Importance of Inspections
Even new homes can have defects. A home inspection is essential because “people make mistakes”. Consider ordering multiple inspections: one after the framing and systems installation (before drywall), another at the final walk‑through, and a final inspection just before closing.
Provide the reports to the builder and request repairs. In earthquake‑prone California, ensure that shear walls, anchor bolts, and other seismic elements are installed correctly.
Closing Timeline
So, when do you close on a new construction home? Typically, closing happens after the home passes final inspections and the certificate of occupancy is issued. Because construction can run behind schedule, builders often specify a range of completion dates rather than a firm date.
Fox Blocks reports that building a home usually takes seven months, but the timeline can reach a year or more once planning and permitting are included. Therefore, remain flexible, monitor progress regularly, and maintain communication with your lender to extend rate locks if necessary.
Deposits and Final Payments
As noted earlier, builders commonly require deposits between $3,000 and 20 % of the purchase price. Your contract will outline when additional payments are due (e.g., after selecting upgrades or upon completion). Keep funds available for unexpected costs, such as increased material prices or changes resulting from city inspections.
What to Know When Building a House with a Builder
Building a house with a builder demands clear communication and careful oversight. Here are key considerations when working on a custom or semi‑custom project.
Choose Your Builder Wisely
Selecting a builder is one of the most consequential decisions you’ll make. Verify licensing, insurance, and financial stability. Visit existing homes to see their workmanship and talk to past clients.
Ask about subcontractors and whether the builder uses the same trades on each project or bids out jobs to the lowest bidder. Consistency often translates to higher quality.
Define Specifications Early
The earlier you make design decisions, the smoother the process will be. Create a specification book detailing finishes, appliances, fixtures, cabinetry, and landscaping.
Ask your builder to price upgrades before construction begins to avoid surprises. Clarify what allowances are included for items like flooring and lighting; if allowances are low, be prepared for additional costs.
Understand Change Orders
Changes during construction can derail schedules and budgets. Establish a change‑order process with deadlines and fees. For instance, if you want to change countertops after they’ve been ordered, you may pay restocking fees or delay the project. Document all changes in writing and keep copies of signed approvals.
Review the Warranty
Ask whether the warranty is provided directly by the builder or through a third‑party insurer. Coverage often follows a 1‑2‑10 format for workmanship, systems, and structural components, but there is variation.
Clarify what voids the warranty—improper maintenance or unauthorized repairs can jeopardize coverage. Also, confirm how long you have to report defects; some warranties require claims to be filed within a certain period after closing.
Comply with California Disclosures and Codes
California has strict disclosure requirements. Sellers (including developers) must provide a Natural Hazards Disclosure Statement indicating whether the property lies within flood zones, dam inundation areas, high fire hazard severity zones, or earthquake fault zones.
Ask to review this disclosure early so you can assess risk and insurance costs. Additionally, verify that the builder has obtained a public report from the Department of Real Estate (DRE) when selling a subdivision; this report discloses material facts about the subdivision, including title issues, common‑area ownership, and maintenance obligations.
Final Thoughts
Buying a new construction home offers modern design, energy efficiency, and the comfort of being the first owner. Still, the process can be complex, especially in California, where buyers must evaluate builders, financing, and local regulations.
Recent housing laws aim to speed up construction and reduce fees, creating more opportunities for homebuyers in the years ahead.
To make your purchase smooth and financially smart, plan carefully, ask questions, and work with trusted professionals.
Ready to finance your new build?
Reach out to ID Mortgage Broker for expert guidance, competitive rates, and personalized mortgage solutions tailored to your California dream home.
FAQs
1. Is it cheaper to buy or build a new house in California?
Building usually costs more upfront due to land, permits, and construction expenses. However, new homes are more energy-efficient and need fewer repairs. In California, the right choice depends on your lot availability, construction costs in your area, and how much customization you want.
2. Can you negotiate on a new construction home?
Yes, but price reductions are uncommon. Builders are more open to negotiating on upgrades, appliance packages, or closing-cost credits. Work with an experienced agent and mortgage broker who can identify incentives and compare financing options for you.
3. How long does it take to buy a new build home?
The process often takes seven months to a year, including planning and permitting. In California, approvals can take longer, so allow extra time for environmental reviews and local inspections.
4. Are there special programs for first-time buyers of new construction homes in California?
Yes. California offers down-payment assistance and rate-reduction programs for qualified buyers. Learn more about first-time home buyer loans in California and speak with a local mortgage broker to confirm eligibility.
5. Do I need an inspection for a new construction home?
Yes. Even new homes can have plumbing or electrical issues. Hire an independent inspector at key stages such as before drywall, before the final walkthrough, and before closing. This ensures the property meets California’s strict building codes.
