Buying a home requires more cash than the down payment alone. Mortgage closing costs can include lender charges, appraisal and credit services, title and settlement services, government recording charges, prepaid interest, initial escrow funding, and other items connected with the transaction.
Closing costs vs. cash to close
Closing costs are the charges and prepaid amounts listed in the mortgage disclosures. Cash to close is the amount the buyer is expected to bring after accounting for the down payment, deposits already paid, lender or seller credits, adjustments, and any amount financed. These numbers answer different questions.
Use the Loan Estimate as the baseline
Review the sections for origination charges, services you cannot shop for, services you can shop for, taxes and government fees, prepaids, initial escrow payment, and other costs. If the lender permits shopping for a service, compare both price and the provider’s role in the closing.
Reconcile the Closing Disclosure
For most mortgages, the Closing Disclosure must be provided at least three business days before closing. Compare it line by line with the latest Loan Estimate. Some fees have limits on how much they can increase, while others may change based on circumstances or services chosen.
Questions to resolve before signing
- Why did any lender charge change?
- Which services were selected, and which could the borrower shop for?
- Are seller credits shown correctly?
- Are property taxes, insurance, and prepaid interest based on the correct dates?
- Is the down payment and deposit credit accurate?
- What method must be used to deliver funds safely?
Protect against wire fraud
Closing instructions can be targeted by criminals who imitate an agent, lender, or title company. Verify wire instructions through a trusted phone number obtained independently, not from a last-minute email. Be suspicious of any sudden change in destination account or urgent request for secrecy.
After closing
Keep the signed Closing Disclosure, promissory note, mortgage or deed of trust, deed, title policy, and evidence of funds transferred. Confirm where and when the first payment is due. If the loan is transferred to a new servicer, verify the notice before changing payment instructions.
A clean closing is a reconciliation exercise. Every important number should connect from the accepted offer and Loan Estimate to the final disclosure and the amount actually transferred.