Are you preparing to buy a home?
Congratulations! Buying a house is one of the biggest investments you can make. But before you take the plunge, there are some things you need to learn first.
One of the things you have to learn is what are closing costs and down payments. Closing costs are fees associated with the mortgage. These fees often cause a big sticker shock for a first-time home buyer.
So in this article, we are going to discuss what are closing costs and down payments, and more importantly, let’s answer the question — do closing costs include down payment?
Let’s dive in!
What Are Closing Costs?
Closing costs on a home refer to the fees and expenses that a home buyer incurs at the end of a real estate transaction. These costs are in addition to the purchase price of the property and cover various services and expenses related to the sale of the home.
They cover property appraisal, home inspection, title search and insurance, underwriting of a mortgage, real estate commissions, taxes, record filing, and attorney fees. Closing costs can also include prepaid items such as property taxes which are pro-rated and paid at closing.
The amount of closing costs can change. It depends on several factors as well, such as:
- the location of the property
- the type of loan
- the buyer’s credit score
- the terms of the sale
These costs are also determined by various parties involved in the transaction. This includes the lender, real estate agent, and title company. In most cases, buyers are responsible for paying closing costs, which are typically due on the day of closing. However, sellers may also need to cover some or all the closing costs, as negotiated in the purchase contract.
What Is a Down Payment?
A down payment on a home refers to the initial amount of money that a buyer pays towards the cost of a property. This payment is usually made at the time of securing a mortgage loan and can range from 3-20% of the total home purchase price. It serves as a way for the home buyer from to show their commitment to the property and reduce the amount of money they need to borrow from the lender.
The payment of the down payment varies, but it typically occurs at the closing of the sale. This means that the down payment is due when all legal documents have been signed and the buyer takes ownership of the property. In some cases, a portion of the down payment may need to be paid upfront, while the remainder is paid at closing.
So, Do Closing Costs Include Down Payment?
Have we answered your question about “Do closing costs include down payment?”
Closing costs and down payment are two separate fees that serve different purposes. So remember to budget for both when preparing to buy a home. And always consult with your agent to clarify any confusion.
What are you waiting for? Start planning and budgeting today, and make your dream a reality.