On a Richmond new build, cash to close depends on the down payment, loan and settlement charges, taxes, prepaids, deposits already credited, and approved builder or lender credits. A builder’s advertised credit doesn’t automatically cover every expense. Compare the contract, Loan Estimate, and Closing Disclosure before relying on it.
A closing-cost credit can shrink the final wire. It doesn’t describe every dollar spent before receiving the keys.
When comparing new construction closing costs in Virginia, we separate the budget into a timeline. That makes offers easier to compare without confusing a design allowance with money available at settlement.
What does a new-build buyer need to budget?
Start with 3 buckets. Keep the earlier payments visible even when they’re credited later.
| Budget bucket | What belongs here | What to check |
|---|---|---|
| Price and down payment | Base price, lot premium, and purchased upgrades | Final contract price and loan amount |
| Closing charges and prepaids | Loan, settlement, tax, insurance, and escrow items | Itemized quotes and assigned payer |
| Money paid earlier | Earnest money, options payments, and inspections | Receipts and whether each payment is credited |
A financed upgrade can increase the purchase price without being a settlement fee. A design-center payment can reduce available savings before closing without automatically reducing the final wire. Keep a payment ledger alongside the contract.
Loan and settlement costs
Loan costs can include origination, appraisal, credit-report charges, discount points, and applicable program charges. Points chosen to obtain a different rate deserve a separate comparison from required charges. Settlement costs can include title services, settlement fees, recording fees, recordation taxes, and applicable HOA or condominium startup charges.
The payer depends on the contract, applicable law, and loan rules. Don’t assume every charge is negotiable or every builder transfers every seller expense to the buyer. The general Virginia closing-cost breakdown covers the broader buyer and seller categories.
Prepaids and initial escrow
Prepaid interest, insurance premiums, and initial tax or insurance reserves aren’t the down payment. They also aren’t all lender earnings. The CFPB’s Closing Disclosure guide separates prepaids from the initial escrow payment. Use the actual estimate rather than assuming a fixed number of months will be collected.
Which costs can the builder cover?
Builder-paid closing costs need written terms. Identify the payer, eligible charges, qualifying home, financing conditions, settlement-provider conditions, and contract or closing deadlines. Ask whether offers can be combined and what happens if construction runs late.
Compare the offer’s form, not just its headline amount:
- Closing-cost credit: Applied to approved expenses, within loan rules.
- Price reduction: Changes the purchase price rather than creating an identical settlement credit.
- Design allowance: Pays for specified selections, not automatically settlement charges.
- Rate buydown: Pays for rate or payment treatment whose cost may count toward concession limits.
A premium-pricing lender credit generally exchanges a higher rate for lower upfront costs, according to CFPB guidance. That isn’t the same as every builder-funded incentive. Fannie Mae expressly excludes genuine premium-pricing lender credits from its interested-party contribution rules, even when the lender is an interested party. Have the lender classify the offer.
Compare Loan Estimates using the same price, down payment, loan product, lock period, and quote timing. Review rate, APR, points, fees, cash required, and payment terms. Our builder and outside lender comparison explains that process; the builder-offer roundup is a separate place to review dated offers and conditions. No promotion is assumed here.
What loan limits apply to builder credits?
These are program-specific rules, not interchangeable allowances. Available eligible expenses can constrain a credit below the percentage limit.
| Loan framework | Limit and percentage base | Important boundary |
|---|---|---|
| Fannie Mae principal residence or second home | LTV/CLTV above 90%: 3%; 75.01% through 90%: 6%; 75% or less: 9% | Lower of sales price or appraised value, not loan amount |
| Fannie Mae investment property | 2%, all CLTV ratios | Separate occupancy category |
| VA | Seller concessions: 4% of reasonable value | Ordinary seller-paid loan closing costs aren’t subject to this 4% cap |
| FHA forward mortgage, Update 18 | Up to 6% of sales price | Eligible costs, exceptions, and implementation must be confirmed |
Fannie Mae B3-4.1-02 also limits financing concessions to actual borrower closing costs. Interested-party contributions can’t fund the down payment, reserves, or minimum borrower contribution. Its common-and-customary seller-cost exclusion and other exceptions require lender classification. These aren’t rules for every conventional loan.
VA guidance distinguishes ordinary closing-cost credits from concessions. Funding-fee credits, debt payoff, and certain prepayments require classification as concessions. “VA allows only 4% in closing costs” would misstate that distinction.
HUD Handbook 4000.1 Update 18, forward-mortgage sections on printed pages 260 to 261 and 339 to 340, allows up to 6% toward origination fees, other closing costs, prepaids, and discount points. Specified buydown costs and upfront mortgage insurance payments count. Contributions above actual eligible costs or 6% are inducements to purchase; they can’t fund the minimum required investment.
FHA timing matters: Update 18 permits immediate implementation of other changes and requires implementation by November 10, 2026; incorporated Mortgagee Letters retain their own dates. Before relying on it for a loan closing earlier, have the lender confirm the applicable version, exceptions, and later changes. A percentage ceiling isn’t a promised credit.
How do Virginia recordation taxes work on a new home?
Under §58.1-801, the state deed recordation tax is $0.25 per $100 or fraction on the greater of consideration or actual value as defined there. A land-only assessment doesn’t make the tax land-only when purchase consideration is higher.
The deed-of-trust charge under §58.1-803 is separate: generally $0.25 per $100 or portion of the secured obligation, subject to statutory exceptions and tiers. Don’t apply the deed’s assessment basis to the loan instrument.
§58.1-814 and §58.1-3800 authorize local recordation tax equal to 1/3 of state tax. Authorization alone doesn’t verify local imposition for a transaction. Request an itemized settlement estimate for Henrico, Chesterfield, Hanover, or Richmond City rather than treating their charges as interchangeable. Recording fees and annual property taxes are separate categories.
Do deposits and options payments reduce cash to close?
Map the timeline: contract earnest money, design or options payments, costs paid before closing, and the final wire. A documented deposit credited to the purchase reduces remaining funds due. Options money may be credited, applied differently, or governed by separate refund terms.
Signed agreements, addenda, receipts, and disclosure treatment control the analysis. Don’t assume a particular builder uses a standard form or provides a universal refund right. Use these builder deposit and contract questions as prompts, not substitutes for reviewing the signed documents.
An inspection or appraisal paid earlier still belongs in the total purchase budget. It shouldn’t be charged again as money still due. Track whether each payment is already included in the quoted costs.
A cash-to-close worksheet without double counting
Hypothetical only, not a Richmond average, fee quote, or loan approval. Assume a $400,000 purchase and equal appraised value, a $380,000 loan, no other interested-party contributions, and no other adjustments or amounts paid outside closing.
| Worksheet item | Amount |
|---|---|
| Down payment: $400,000 minus $380,000 | $20,000 |
| Assumed closing costs, including prepaids and escrows | +$12,000 |
| Approved eligible builder credit | -$8,000 |
| Documented deposit already paid and credited | -$5,000 |
| Remaining cash required | $19,000 |
At 95% LTV, assuming this Fannie Mae principal-residence transaction also falls in the above-90% LTV/CLTV tier, the 3% ceiling is $12,000. The $8,000 credit is below that ceiling and the assumed $12,000 eligible costs. Actual underwriting still controls.
Total buyer funds are $24,000: the earlier $5,000 deposit plus $19,000 remaining. Calling $19,000 the total would omit money already spent. Extra options payments, inspections, or adjustments require a revised worksheet.
Use the buyer cash-to-close calculator for planning, replacing every default with current quotes. Reconcile deposits, seller and lender credits, borrower-paid-before-closing entries, and the final cash-to-close calculation on the Closing Disclosure.
Why can taxes or escrow change after closing?
A land-only proration, completed-home assessment, later partial-year bill, and escrow shortage are distinct events. Recordation tax doesn’t pay that later property-tax bill. Virginia’s partial-year assessment statute depends on local ordinance and completion circumstances; not every buyer receives an identical bill.
Ask the assessor or treasurer and servicer whether estimated escrow reflects the completed home and who will pay any separate bill. Our new-construction property-tax guide covers that separate budgeting issue.
What should be confirmed before signing?
- Itemized Loan Estimate and outside-financing comparison.
- Written credit eligibility, deadlines, and unused-credit treatment.
- Deposit ledger, options addenda, and refund conditions.
- Settlement-agent choice and completed-home tax estimate.
- Compensation obligations and final disclosure reconciliation.
For covered mortgages, CFPB says the Loan Estimate comes within 3 business days of application and the Closing Disclosure at least 3 business days before closing. Don’t assume every construction-financing structure uses these disclosures.
Builders may offer buyer-agent compensation. The buyer agreement, builder registration policy, written compensation terms, and loan rules determine obligations. Representation isn’t automatically free. Start with our new-construction buyer checklist before visiting model homes.
Frequently asked questions
No automatic rule makes a builder pay every buyer expense. A written offer may cover specified eligible charges, subject to financing rules and deadlines. Compare the signed terms with the Loan Estimate and Closing Disclosure. Down payment, earlier payments, and excluded charges still need separate funding.
Don’t treat a closing-cost credit as down-payment money. Fannie Mae prohibits interested-party contributions toward down payment, reserves, or minimum borrower contribution. FHA prohibits them toward minimum required investment. Have the lender identify the applicable program and approved uses before subtracting an advertised credit from required buyer funds.
Unused credit isn’t automatically cash payable to the buyer. Fannie Mae treats financing concessions above borrower closing costs as sales concessions; FHA treats excess eligible-cost contributions as inducements to purchase. Ask the lender and settlement agent to reconcile the documents. Don’t arrange an undisclosed payment outside settlement.
It depends on the signed contract and options addenda. An options payment might be credited toward the purchase, applied separately, or subject to different refund conditions. Request a ledger and receipts showing exactly how it appears in the closing calculation. Don’t subtract it without confirming the documented treatment.
Don’t assume a later property-tax bill has been paid at settlement. Closing prorations and initial escrow deposits may not reflect the completed home’s full assessment. Ask the locality and servicer how a separate bill would be handled. Recordation taxes are separate from annual taxes and partial-year assessments.
Virginia Code §55.1-1006 gives the purchaser or borrower the right to select the settlement agent. It says the seller may not require a particular agent as a condition of sale. Have disputed provider-linked incentive terms reviewed professionally; that narrow rule doesn’t resolve every conditional-discount question.
Compare total funds, timing, and written conditions before choosing an offer. We can help organize the questions before touring. Book a pre-tour consultation with Daniel Yoon, REALTOR®, eXp Realty.
Educational information only, not legal, tax, or lending advice. Terms depend on the transaction. Consult the lender, settlement agent, attorney, tax professional, and appropriate local offices for transaction-specific answers.