Two things first-time homebuyers often mix up are closing costs and down payments. Both of these are costs you need to pay upfront when you purchase your home. But they are not the same thing. Let’s break it down, explaining the difference between closing costs and down payments.
What are Closing Costs?
Closing costs are an assortment of fees you need to pay at closing. Some of what is included in closing costs are mortgage fees, recording costs, appraisal fees and so on.
With some types of mortgage products, the closing costs are capped. And in some cases, they may be payable by the seller.
What is a Down Payment?
A down payment is a portion of your mortgage that you pay upfront when you buy your home. It could be 20%, 10%, or some other amount. So, for example, if you are buying a home with a mortgage for $100,000, you might pay $20,000 as a 20% down payment. After that, you will only have $80,000 left to pay. Paying 20% can help you avoid having to pay for private mortgage insurance (PMI).
As there are benefits and drawbacks to making large and small down payments, you will need to assess your financial situation and goals to decide which is better for you.
If you qualify for a VA mortgage or a USDA mortgage, you can buy a home with zero down payment.
Buy a Home in Virginia Now
Now you understand the difference between a down payment and closing costs. If you have more questions about either or both of these topics, you can get answers during your consultation. To schedule your consultation now, please give us a call today at (540) 838-5868. We can help you buy a home affordably in Blacksburg or anywhere in Virginia.