What to know about new construction closing costs:
- Closing costs on a new construction home typically run 2% to 6% of the purchase price, but the state you build in changes that number more than almost anything else.
- Tennessee buyers pay a 0.37% realty transfer tax plus a mortgage tax; Mississippi charges no transfer tax at all, which is why totals differ by thousands of dollars between Shelby County and DeSoto County.
- Builder-preferred lenders often cover part of your closing costs, but 64% of builders now offer these incentives, so the “discount” is common enough to negotiate rather than simply accept.
- Some fees are fixed by law and some are fully negotiable. Read on to see exactly which is which before you sit down at the closing table.
Buying new construction feels different from buying a resale. There is no seller haggling over who fixes the roof, but there is a builder-affiliated lender and a stack of fees that will not always look like what your friends paid on their older home.
How Much Are Closing Costs on New Construction?
Closing costs on new construction homes generally total 2% to 6% of the purchase price. On a $400,000 home, that is $8,000 to $24,000, depending on your state, your lender, and whether the builder contributes anything.
That national range hides a real issue here: Memphis-area buyers often compare available homes in Shelby County, Tennessee, and DeSoto County, Mississippi, a few miles apart, with different closing costs attached to each.
According to Bankrate’s 2026 state analysis, the average Tennessee purchase carries about $5,063 in closing costs, or 1.18% of price. Mississippi averages $2,332, or 0.98%. That gap comes down to one line item: transfer tax.
Comparing new construction to an existing home in the same neighborhood? The closing cost math is only one piece of that decision. See how new construction stacks up against existing homes in Memphis →
What Fees Actually Make Up Your Closing Costs?
Your closing costs break down into four categories: lender fees, title and settlement charges, government fees, and prepaid items. Each shows up as its own line on your Loan Estimate.
Lender Fees
- Origination, underwriting, and processing: roughly 0.5% to 1% of the loan
- Credit report and application fees
- Discount points, if you buy down your rate
Title and Settlement Charges
- Title search and title insurance policy
- Closing or attorney fees
- Property survey, nearly always required since the lot has never held a finished home
Government Fees
- County recording fees
- State transfer and mortgage taxes, which vary sharply by state
- Builder administrative or documentation fees
Prepaids and Escrow
- A year of homeowners insurance, paid in advance
- Property taxes prorated from closing date
- Initial escrow deposit, often two months of taxes and insurance
A Closing Disclosure spells out every line item at least three business days before you sign, according to the Consumer Financial Protection Bureau. Use that window to compare it against your original Loan Estimate and flag anything that jumped.
Want to see what your own numbers might look like before you talk to a lender? Run a few scenarios with different loan amounts and down payments. Try the mortgage calculator →
Are Closing Costs Different in Tennessee vs. Mississippi?
Yes, and the gap is bigger than most buyers expect. Tennessee charges a realty transfer tax of $0.37 per $100 of purchase price plus a mortgage tax on financed amounts. Mississippi charges no state transfer tax at all.
| Shelby County, TN | DeSoto County, MS | |
|---|---|---|
| Average closing costs | $5,063 (1.18% of price) | $2,332 (0.98% of price) |
| State transfer tax | $0.37 per $100 of price | None |
| Mortgage recording tax | $0.115 per $100 financed (first $2,000 exempt) | None |
| Attorney required at closing | No | Not legally required, though commonly used |
| Closing agent | Title company or escrow agent | Title company or attorney |
Those rates come from the Tennessee Department of Revenue. On a $400,000 home financed at $320,000, that is roughly $1,480 in transfer tax plus $368 in mortgage tax before any other fee. The equivalent DeSoto County home skips both.
This does not make Mississippi automatically cheaper overall. Insurance, HOA structures, and community fees still vary. But when similar communities sit on either side of the state line, the transfer tax gap is worth running before you fall for a floor plan.
What Costs Are Unique to New Construction?
New construction adds line items resale buyers rarely see: an affiliated lender relationship, extra inspections, and an HOA still building its reserves.
Builder-Preferred Lenders and Title Companies
Builders often incentivize their in-house or preferred lender. That is not automatically bad. It can mean a faster process and real credits, or a rate slightly higher than shopping independently. Get the incentive in writing and compare it to an outside quote.
Surveys and Phase Inspections
Because the lot has never carried a finished home, a fresh survey is close to mandatory. Many buyers also pay for a pre-drywall inspection and a final walkthrough inspection, beyond the builder’s own municipal inspections.
HOA Setup and Working Capital
Brand-new communities often need an initial contribution to fund HOA reserves before enough homes exist to sustain normal dues. This one-time fee sits apart from your regular HOA payment.
How Can You Reduce What You Pay at Closing?
Builder incentives are the biggest lever most buyers have. In a recent National Association of Home Builders survey, 64% of builders reported offering sales incentives, and closing cost assistance is one of the most common forms.
- Negotiate the incentive amount. Builders often prefer covering closing costs over cutting the sale price, which resets neighborhood comparables.
- Get the offer in writing before signing, not after.
- Compare the preferred lender’s Loan Estimate against an outside quote. A credit tied to a rate 0.375% higher can cost more long term.
- Learn which fees are fixed versus shoppable before you negotiate.
| Fixed by Law or Policy | Usually Negotiable or Shoppable |
|---|---|
| State transfer and mortgage taxes | Title insurance provider |
| County recording fees | Home warranty add-ons |
| Property tax proration | Survey company, in some cases |
| Credit report fee | Loan origination fee amount |
| HOA startup contribution | Builder closing cost credit |
Still deciding between building new and buying an existing home nearby? The upfront price is only half of that comparison. See what it actually costs to build in Memphis →
What Should You Look For in a Builder’s Closing Process?
A builder who handles closings well walks you through every fee before you sign documents you have never seen. Ask for a written closing cost estimate at contract signing, how phase inspections work, who pays for them, and whether the HOA startup fee is disclosed upfront.
The buyers who feel good on closing day are almost always the ones who asked these questions in month one, not week one, before a single document landed in front of them to sign.
Frequently Asked Questions About New Construction Closing Costs
Are closing costs cheaper on new construction?
Not automatically. Both typically run 2% to 6% of the purchase price. New builds sometimes add survey and inspection fees resale homes skip, but builder incentives can offset or beat what a resale seller offers.
When do you pay closing costs on a construction loan?
With a one-time-close loan, you pay closing costs once, at origination, then it converts to a permanent mortgage when the home is finished. A separate construction loan and mortgage means two closings and two sets of costs.
Who pays closing costs on a new build in Tennessee or Mississippi?
In both states, buyers cover their loan-related fees while builders and sellers negotiate the rest. Tennessee’s transfer tax is the buyer’s responsibility by custom, though it is negotiable.
Can you negotiate closing costs with a builder?
Yes. Builders offer closing cost credits far more often than they cut sale price, since a price cut affects every future comparable sale in the community. Ask early and get it in writing.
Do you need an attorney to close on a new construction home in Mississippi?
Mississippi has no formal law requiring an attorney at residential closings, though attorneys commonly handle the process there. Tennessee closings typically go through a title company instead.
Buying New Construction Should Not Come With Closing Day Surprises
Closing costs are one of the few parts of buying new construction that are fully knowable in advance, if someone walks you through them early. The states, fee categories, and most dollar amounts are public information. What varies is whether your builder shows the full picture up front or lets you find out at the table.
Meridian Premier Homes has built more than 400 homes across the Memphis metro and DeSoto County since 2014. Every buyer gets a written closing cost estimate before signing a purchase agreement, not after.
Contact Meridian Premier Homes to talk through your specific numbers →
