Closing Costs VS. The Down Payment

The closing costs are not the same thing as the down payment.

The down payment is money you are putting down towards the purchase of the house, whereas the closing costs are monies associated with getting the transaction through to its completion.

Closing costs are associated with the fees of of your lender, all fees related to the property and title, and government fees and taxes.

The Lender Has The Answers

The person that can give you a complete breakdown as to what your closing costs, down payment and monthly payment will ultimately be, is your lender.

If you are already working with a loan officer, he/she is the best person to give you a more accurate amount of what you can expect to pay for your closing costs as well as what type of loan you can get and the minimum amount of money needed for the down payment.

It is very difficult to give an exact number on what your closing costs will be because it depends on so many factors but as a general rule anywhere from 3% to 5 % of your purchasing price.

If you are using a VA loan, this can offset both your down payment needs as well as your need for closing costs as you can get them all built in to your loan.

Either way, you need to ask your lender for a Good Faith Estimate. This will provide the details of all the expenses you can expect to have in your purchase.

Help With Closing Costs

Closing costs are the fees associated with the sale of a property. Who pays for them is negotiable.

If you are a first time home buyer, many times you will ask the seller to assist with your closing
costs. This is a negotiation that takes place within your offer to purchase.

A seller paying any closing costs is a perk to the buyer, and an incentive for the buyer to purchase the home with the seller giving up what ever amount they agree to pay.

That amount comes off the seller's net, along with many other costs associated with the sale of the home. A buyer, may need the seller to pay a portion of or all of the closing costs to enable them to purchase the home. In doing so, they may have to give up on something else they wanted in the deal to capture that concession.

Closing costs can be a fairly significant cost to seller and the buyer considering the down payment requirements on certain types of loans. Some buyers simply don't have the cash set aside to lay out both the down payment and the closing costs.

Once under contract, the seller is not obligated to pay any of the buyers closing costs other than those written into your contract.

Closing cost can be somewhat confusing for buyers as the term frequently gets tangled up with the use of the word down payment.

You will need both closing costs and a down payment in order to secure a home.

Speaking with your lender will help clarify these two terms and the actual amount of money you can expect to need.