We get this question a lot from our clients: What’s the difference between closing costs and a down payment when purchasing a home? Here’s Mike Zubretsky, Principal Broker & Owner of Venture One Realty of CT to explain the difference between the two. Venture One Realty is a Full Service 1% Listing Fee Real Estate Brokerage in Connecticut. Call us at 860.644.7898 or visit us online at ventureonerealtyllc.com.

Closing Costs vs Down Payment

It is really important to consider the closing costs when buying a house, in addition to the down payment. 

The down payment on a home is not the same money as the money you will need to pay for closing costs even though they both help you buy a home.

When you are shopping for a house, you may be focused more on gathering the money you will need for a down payment then you are worrying about coming up with the cash to cover closing costs.

A successful home purchase will include both a down payment and closing costs. 

The closing costs cover a variety of expenses, including:

  • Taxes
  • Fees (real estate agents, legal costs, etc.)
  • Administrative expenses 

And more. 

Down payments usually consist of two parts

The first part of the down payment is your deposit, also called earnest money, that you put in escrow when you first make an “offer to purchase” on a home.

The second component of the down payment includes the money that the lender gains from you upon making the purchase at the point of closing.

The Down Payment

It is important that the down payment money is paid during the home buying process, to ensure the sale can move forward. Your estate agents and attorneys will notify you when this is due, and the amount that you owe. 

The total cost of the down payment or earnest money will be deducted from the price of the home when the sale is finalized. 

Any amount that remains will typically get folded into your loan.

The Closing Costs

These are an assortment of taxes and fees charged by government entities, local municipalities, and administrative groups handling your loan and processing your real estate purchase paperwork.

They are very different from the down payment

Closing costs will usually include fees and charges relative to the type of loan you have and the services required to process that specific loan.

FHA Loans and down payments allow most closing costs to be included in the loan which can be very helpful if you don’t have the cash required to close.

Frequently Asked Questions About Closing Costs and Down Payments

Wrapping your head around the closing costs and down payments can be tricky. To help you on your journey, here are some of the most frequently asked questions that we get, so you can better prepare. 

When Do You Pay the Closing Costs and the Down Payment?

The down payment is due when you close on the sale of property, so that the sale can be finalized and the mortgage can begin. The closing costs are paid at closing. Both of the costs can be paid at the same time, via the same check. 

Do Closing Costs Include a Down Payment?

No, your closings costs won’t include a down payment.

However, there are cases where the lender that you have applied with, will consolidate the down payment and the closing costs for you to pay in one go. This does not include earnest money. 

You should note that the closing costs are not deducted from the down payment. The minimum amount required for the down payment will still be owed in full after you have paid the closing costs. 

Is the Down Payment Included in the Loan Amount?

The down payment for the property you are purchasing will not be included in the loan, and will need to be paid for separately. All parts of the down payment will be deducted from the overall purchase price. The remaining amount due is the loan amount. The down payment is required when purchasing a house, to satisfy the lender and the loan requirements.

How to Pay the Down Payment on a House at Closing

The real estate agent or mortgage lender will be able to tell you the total amount of money that is going to be due, a few days prior to closing. In addition to the methods you can pay, which may vary depending on the lender used. The down payment can typically be paid using a cashier’s check or a certified check. 

Why Are Closing Costs So High

Closing costs can often be high for a number of reasons. They might be high due to the current state of the housing market in Connecticut, meaning that house prices are higher and therefore, you pay a higher percentage on your fees. It will also depend on what lender, estate agent and attorneys you choose to work with. The down payment is typically a percentage of the house price you are purchasing, so it is important to consider how much you will have to pay upfront when buying a house, to ensure you can afford it. 

It is crucial to understand the difference between closing costs vs the down payment when buying a house. This will ensure you are fully prepared, and don’t come up against any unforeseen issues. Your local real estate agent will be able to help you understand the costs involved along the way.

I hope this discussion has been helpful.

Please feel free to contact me with any questions you may have so that I may help you in the purchase of  a home.


Closing Costs vs. Down Payment, Venture One Realty has recognized that Connecticut Homeowners need and want a way to keep more of their hard earned equity when selling their home. Our Clients save Thousands of Dollars without sacrificing the services that are critical to maximizing the sale price of their home. We offer all the same MLS exposure, marketing tools, technology, quality of service, expertise, and personal attention as the Other Realty Companies but without the costly Real Estate Commission. You pay only 1%.