Closing Costs & Down Payments
Updated January 1, 1 . AmFam Team
Are closing costs and down payments the same thing? They may seem like it, but they’re not. That down payment on a home is not the same as the money you’ll need to pay for closing costs, though they both help you buy a home. When you’re shopping for a house, you may be focused more on gathering the money you’ll need for a down payment than you are worrying about coming up with the cash to cover closing costs. But both play a key role in a successful home purchase.
What’s the difference between closing costs and your down payment? Closing costs cover fees, taxes and administrative expenses required to process the purchase of your home while your down payment usually consists of two parts. The first part of the down payment is the earnest money, or the cash you put in escrow when you first make an “offer to purchase” on the home. The second part is the remainder of the down payment which you give the lender when you make the purchase at closing.
When Do You Pay the Closing Costs and the Down Payment?
The closing costs are paid at closing, and the down payment is due at closing. Though both the down payment and closing costs can be paid via the same check.
Do Closing Costs Include a Down Payment?
No, your closings costs won’t include a down payment. But some lenders will combine all of the funds required at closing and call it “cash due at closing” which bundles closing costs and the down payment amount — not including the earnest money. It’s also important to note that closing costs do not count towards the minimum down payment amount required by certain loan types.
Is the Down Payment Included in the Loan Amount?
Your down payment is not included in the loan amount. Both parts of the down payment are deducted from the purchase price — what remains is the loan amount. When making a home purchase, the down payment is the total you’ll be required to pay to satisfy the requirements of the loan.
Are Closing Costs Based on the Loan Amount or the Purchase Price?
Closing costs can be flat rates and charges are calculated off of the purchase price. Because each state and local municipality has their own specific set of charges, they can vary one to the next. Your lender’s charges and other fees are typically based off the loan amount.
For instance, a $200,000 purchase price will usually require a 3.5% ($7,000) down payment. Some lender fees due at closing may be based off of loan amount ($193,000) and other county and state fees will be based off the full purchase price. 3.5% is a typical FHA loan down payment and closing costs will include a private mortgage insurance payment in addition to other related fees.
How to Pay the Down Payment on a House at Closing
Usually, a certified check or a cashier’s check is used to cover the down payment at closing. Your title company or lender will usually get you a total amount due in the days before closing.
Remember to Budget for Insurance Costs at Closing
As you’re building your strategy to afford the purchase of your home and are gathering the funds required for closing, make some time to connect with your American Family Insurance agent (Opens in a new tab). You’ll find they’re experts in crafting a homeowners policy that fits the needs of your budget and your new home.
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Your home is more than a roof over your head. It’s where your dreams grow, your family thrives and memories are made. But the possessions you keep inside are important, too.
Whether you’re renting an apartment or own your home, you’ve most likely got an insurance policy designed to protect your dwelling and the things inside. Should the unthinkable happen and you have to use that insurance policy, it’s important to have a plan in place. And a home inventory list is a great way to get started!
We’ll walk you through how to create a home inventory so — in the event of the unexpected — you’ll be more prepared and have a streamlined recovery.
What Is a Home Inventory?
Quite simply, a home inventory is a complete list of all the items, especially valuables, in and around your home. The best home inventories include photos, descriptions and dollar values of each of your belongings. The more detail, the better! It’ll help you provide a comprehensive list to your agent of items lost in the event your home is damaged or destroyed, allowing you to get the most out of your coverage.
When your describing the items in your list, remember that the more information, the better. Here’s a quick reference list of the type of information you should include in your home inventory list:
- An in-depth description of the items. For example, rather than writing down “diamond ring,” be more descriptive, such as: “an emerald cut diamond ring, with white gold shank, accent stones and initials inscribed below the bridge.”
- Make, model, and/or serial number of the items.
- Date of purchase, receipts and photos.
- Estimated replacement cost if you bought it today. Do note that the value of the items might be different today than it was when you first bought them. This is especially true with jewelry, and other valuables.
- Appraisals at time of purchase. Especially if your items were appraised for insurance purposes.
Why Do I Need a Home Inventory?
Whether you’re a homeowner or a renter, everyone can benefit from a home inventory!
If you ever have to make a claim, a home inventory is a great asset to have, especially after stressful events like theft, storm damage or a fire (take a look at how one renter used their home inventory after facing an apartment fire).
When you make a claim, you typically submit information on everything that was lost — which can be difficult to do off the top of your head for all your possessions. Remembering to replace your TV or computer are no-brainers, but when it comes to remembering each piece of jewelry in your jewelry box, things tend to get overlooked. Having a personal property inventory will help, along with knowing how to properly insure your jewelry.
When you have your home inventory checklist, you know exactly what needs to be replaced, and you’ll have peace of mind knowing your entire household is protected.
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You’re admiring the rain from the comfort of your home when you notice a sound — the unmistakable drip of water dropping onto your floor. The first and hardest step is figuring out why your roof is leaking. And with these tips, you’ll find the culprit in no time!
Here’s Why Your Roof Is Leaking
The list of reasons why your roof is leaking may seem long, but don’t worry — when it comes to finding the leak and fixing it, the finding is the hardest part. And the good thing about these problems? They can all be fixed. Check out the list and see what’s troubling your roof:
Your roof is old
Roofs don’t last forever. Protecting your home and everything inside it from the elements comes with a cost. And with all that rain, snow, ice, wind and even sunlight wearing down your roof, it becomes more susceptible to leaks. Every roof will eventually need to be replaced, so learn more about how long your roof should last based on what it’s made of.
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There’s no good time to find out your roof needs repair — but you may be able to mitigate that pain by routinely checking your roof for damage after severe weather. Waiting for a leak or damage to present itself gives the problem time to grow and worsen.
And sometimes, you’ll be faced with expensive roof and interior damage repairs if you’re not diligent. By being proactive and checking your roof for damage after severe weather hits can help your roof — and your savings — stay healthy.
