For Home Buyers January 23, 2023

Downpayment vs Closing Costs

When buying a home, there are several costs that need to be considered beyond the purchase price. One of the most significant costs is the down payment, which is the initial payment made by the buyer towards the purchase price. Another important cost is closing costs, which are a variety of expenses that are incurred in the process of buying a home. Understanding the differences between these two costs is important for anyone looking to buy a home.

A down payment is a percentage of the purchase price of the home that is paid upfront. The amount of the down payment can vary depending on the type of loan, the creditworthiness of the buyer, and the price of the home. In general, the higher the down payment, the lower the monthly mortgage payment and the less interest paid over the life of the loan. For example, for a conventional loan, the down payment is typically 20% of the purchase price. For an FHA loan, it’s 3.5%. Some loan options offer you a $0 down-payment option. The down payment is also a way to show that the buyer has some “skin in the game” and is committed to the purchase. Make sure to talk to mortgage lenders to see what your options are.

Closing costs, on the other hand, are a variety of expenses that are incurred in the process of buying a home. These costs can include appraisal fees, title insurance, attorney fees, origination fees, and more. These costs can vary depending on the price of the home, the type of loan, and the location of the property. In general, closing costs are usually between 1-5% of the purchase price, although this can vary widely.

Closing costs can be paid upfront at closing or they can be rolled into the loan. Many buyers choose to include closing costs in their loan in order to minimize the amount of cash they need to bring to the closing table. Make sure to speak with a mortgage officer to see if this is an option for you.

For more information check out resources such as the Consumer Financial Protection Bureau (CFPB) website ( or the National Association of Realtors (NAR) website (

It is important to remember that these costs can vary depending on the location, the type of loan, and the specific property you are buying. It is always a good idea to consult with a professional and do your own research to get a more accurate picture of what you should expect to pay in closing costs.