How the Purchase Timeline Works
Buying pre-construction means signing an agreement of purchase and sale years before the building is complete, paying a series of deposits over time, and closing once the unit is ready for occupancy, sometimes followed by a final closing when the building registers.
Deposit Structure and Carrying Costs
Deposits are typically paid in stages over the first year or two after signing, often totaling 15 to 20 percent of the purchase price before final closing. Between occupancy and final closing, buyers often pay occupancy fees that function similarly to rent but do not build equity.
- Staged deposits before final closing
- Occupancy fees during interim occupancy
- Mortgage financing arranged closer to final closing
Financing at Closing
Your mortgage financing typically gets arranged closer to the final closing date, using rates and lending rules available at that time rather than when you first signed the purchase agreement. This means your qualification and the property's appraised value need to be reassessed years after your original purchase.
Appraisal and Value Risk
In a slower market, the property's appraised value at closing could come in lower than the original purchase price, which can affect how much financing is available and how much cash you need to bring to closing. It is worth having a financial cushion in case this happens.
Planning for the Long Timeline
Because years pass between signing and closing, your income, credit, and the mortgage rules themselves can all change before you need financing. Staying in touch with a mortgage broker periodically throughout the process helps you stay prepared rather than surprised.
Frequently asked questions
- Do I need a bigger down payment for this type of property?
- In most cases yes, since lenders view these properties as carrying more risk than a standard owner-occupied home. The exact amount depends on the property type, the lender, and your overall financial picture, so it is worth getting a clear answer before you start shopping.
- Can I use projected rental income before I have a tenant?
- Some lenders will accept a market rent appraisal or lease commitment for this, while others want to see an existing lease in place. Rules vary quite a bit between lenders, which is one reason it helps to work with a broker who can compare options.
- How long does approval usually take?
- Timelines vary based on the complexity of the file and whether extra documentation like appraisals or building permits are needed. Starting the conversation early, before you are under a tight closing deadline, generally leads to a smoother process.