Closing Costs vs. Down Payment
They are not the same.
Suppose:
- Purchase price: $500,000
- Your financing requires a particular down payment
- You may ALSO need funds for closing costs and prepaid expenses
This is why buyers should ask: "How much cash do I need to close?", not merely "How much is my down payment?"
What Can Buyer Closing Costs Include?
Depending on the transaction:
Lender Costs
Potential examples:
- Origination charges
- Underwriting/processing charges
- Points if purchased
- Credit-related charges
- Other loan charges
Appraisal
When required by the financing.
Title and Escrow / Settlement
Charges depend on transaction, local practices and negotiated contract terms. Learn about title insurance and escrow if these are new to you.
Recording
Government charges for recording appropriate transaction documents.
Prepaid Expenses
These are sometimes confused with fees.
A buyer may need to prepay or fund amounts for:
- Homeowners insurance
- Property taxes
- Interest
- Mortgage escrow reserves
Why Can't Lisa Just Tell Me My Closing Costs?
Because they depend on your actual:
- Loan
- Lender
- Purchase price
- Closing date
- Insurance
- Property
- Contract
- Title/escrow charges
Your lender provides loan disclosures and the settlement process produces transaction-specific numbers.
Lisa can help you understand how those numbers interact with the purchase contract.
Don't Compare Offers Only by Rate
One lender might advertise a lower rate but charge more in points and fees.
Another may offer a slightly higher rate with a lender credit.
Compare the entire Loan Estimate, not just the headline rate.
Can the Seller Pay My Closing Costs?
Potentially, subject to:
- Negotiation
- Loan-program limits
- Appraisal/value considerations
- Seller agreement
A seller contribution is not automatically "free money."
The entire economics of the offer matter.
Example
Offer A: Lower price, no concession.
Offer B: Slightly different price with seller contribution toward eligible closing costs.
Depending on the buyer's financing and cash position, Offer B might be more useful even if its headline purchase price is higher.
This requires coordination with the lender.
Why First-Time Buyers Get Surprised
They save for the down payment.
Then discover:
- Inspection
- Appraisal
- Insurance
- Closing costs
- Prepaids
- Moving
also require money.
Build the cash-to-close plan BEFORE writing offers.
How Lisa Helps
Lisa can work with you and your lender to understand whether seller concessions or other contract terms could improve the transaction.
