🏡 Closing Costs vs. Cash to Close: What’s the Difference?

When you’re getting ready to buy a home, you’ll hear the terms closing costs and cash to close a lot. They might sound like the same thing, but they cover different expenses. Here’s what you need to know so there are no surprises at the closing table.

🔍 What Are Closing Costs?

Closing costs are fees you pay to finalize your mortgage. They usually range from 2% to 5% of the home’s price and can include:

1. Lender fees – Loan processing, underwriting, and origination costs.
2. Appraisal & inspection fees – To confirm the home’s value and condition.
3. Title insurance & attorney fees – Ensures you legally own the home.
4. Prepaid expenses – Property taxes, homeowners insurance, and prepaid interest.
5. Recording fees – Fees paid to the county to make everything official.

💰 What Is Cash to Close?

Cash to close is the total amount you need to bring to closing. It includes:

1. Your down payment – A percentage of the home’s price.
2. Closing costs – Minus any lender credits or seller-paid costs.
3. Prepaid taxes, insurance, and interest – To cover your first few months.
4. Earnest money deposit adjustment – If you put money down earlier, it’s deducted from what you owe at closing.

Your lender will send a Closing Disclosure a few days before closing with the exact amount due.

⚖️ Key Differences

1. Closing costs = fees for loan processing, legal work, and prepaid expenses.
2. Cash to close = total amount due at closing, including your down payment.

📉 How to Lower Closing Costs

1. Negotiate with the seller – Some sellers agree to cover part of your closing costs.
2. Ask about lender credits – Some lenders offer credits in exchange for a slightly higher interest rate.
3. Look into assistance programs – Many programs help first-time buyers with upfront costs.

🔍 Ready to Learn More?

If you have questions about getting a mortgage or want to explore your options, reach out! I’m here to help guide you through every step of the process.