Many people ask, “Does the closure fee include a down payment?” When they’re buying a house. And the simple answer is no, they are not the same. It’s easy to confuse them as it’s both the big costs you pay when you’re in the home viewing process.
Think of it like this:
Your down payment is the first chunk of money that comes at the purchase price of your home. It’s a personal investment in your property. Closure fees are all fees for the services required to complete your home sale. This includes valuation fees, title insurance, lender fees and more.
So, both are planned at the same time, but two different things. Whether you buy your first home in Washington or in Washington, it’s important to understand the difference.
Closure fees and down payments
So, what is the difference between closing costs and down payments? Here we explain the distinction.
down payment
What it is: The down payment is the first part of the purchase price of the home you pay yourself. It is the ratio of the direct investment in real estate and the total price. Purpose: Reduce the amount you need to borrow from a lender (mortgage). A larger down payment can lead to less loans and potentially lower interest rates, and can help you avoid private mortgage insurance (PMI) if you beat at least 20%. Where it goes: Money goes directly towards the price of the house and builds capital from day one.
Closure costs
What they are: Closure costs are all different fees and costs associated with final decisions on home sales. Think of it as the cost of doing business. Purpose: These fees cover the services and management tasks required to process the loan and legally transfer property ownership. Included: The list may be long, but general closure costs include: Lender Fees (for processing loans) Valuation Fees Insurance and Title Search Fees Lawyer Fees and Tax Record Tax and Tax Property Tax and Homeowner Insurance Initial Escrow Payment: Money is distributed to all different parties related to transactions such as lenders, local governments.
Both are paid at the closing table roughly at the same time, but it is important to budget those budgets individually. The lender will provide a “closure disclosure” at least three days before the deadline. This gives you a detailed breakdown of all these costs.
Understanding the closure process
Let’s walk through every step of the closure process and what to expect between each.
What happens before the closing day?
First, you and the seller agree to close on a particular day. Your lender will provide a document called closed disclosure. This is a very important paper as it lays out all the final details of your mortgage, including your loan terms and fees and expenses you will pay. Read carefully and ask if something appears confused.
What will happen on the closing day?
Everyone: You, the seller, and your real estate agent traditionally meet in a title company or at a lawyer’s office. However, meeting in person is not an option. In such cases, you can sign the paper with a mobile notary that often comes to you.
Just ask your agent if this is an option and make sure you have time to check everything before signing. Once all the documents are signed and the money is sent, you will eventually get the key. Congratulations, you are a homeowner.
Conclusions on falls and closing costs
To wrap it all up, don’t forget that your down payment and closing costs are two distinct things, despite you paying at the same time. A down payment is a personal investment in your home, and closing costs are the fees for making the transaction official.
Now that you know the difference, don’t let them stop you from finding your dream home. If you’re ready to start, you can find the Redfin agent, navigate the process, and find the appropriate properties.
