The home buying process can be overwhelming and confusing. There are so many processes to take care of, numbers to keep track of, lingo to know, and timelines to meet. It’s easy to get confused. Luckily, online communities are a great way to communicate with other home buyers and ask questions. “I can’t help but feel like I am being misled,” Migta Jean Baptiste wrote in a First Time Homebuyers Facebook group. Baptiste said that her realtor told her the price of a house she was interested in was non-negotiable since it was lender-owned. She then expressed confusion and concern about the difference between the down payment and closing cost: “We were preapproved for 325k [for a down payment] and we are trying to stay below that, does that mean in addition to our DP we have to save an additional 8000 for closing cost?”

What is the difference between down payment and closing cost?

Luckily, members of the First Time Homebuyers Facebook group were very helpful and accurate in answering Baptiste’s questions. “Yes, you will have two separate costs.” Kelly Pinhier clarified. “Down payment and then closing costs. Closing costs are usually for things like title fees, appraisal, underwriting done by the bank, and attorney fees.” Pinhier is correct. The closing costs is made up of all the fees and taxes you need to process the purchase of a home: anything you need to pay to the government, local municipalities, and other groups that are part of the loan process. The price will depend on the type of loan you have and the services it requires. Sometimes it will be included in the loan. Meanwhile, a down payment is a fee paid in two parts: one put in escrow when you make an offer, and the second paid at closing (which makes it easy to get confused with the “closing cost!”) Whatever you pay in a down payment will be deducted from the price of your home, and the remaining amount will probably tie into your loan. In Baptiste’s case, she needed to pay 3.5% in down payment and an additional amount of $7k-$8k in closing fees. This was a shock to her since she wasn’t aware of the difference between the two. It’s important to understand these things while buying a home so that you aren’t blindsided by the fees like this. Baptiste isn’t the only one this has happened to. “I was shocked by closing costs too,” Tessie Knight commented. “In our case, they’re actually more than the down payment itself. I had to tap into my 401k and our additional saved funds to come up with enough, and I had to buy up the interest rate to get some lender credit to help with the closing costs.” Luckily, there are options to help deal with these costs, and the right lender will help you along the way. “Your lender should be able to guide you into the right program for you,” Knight said. “I would definitely look into down payment assistance.”

When is it too late to drop an agent or loan officer?

“The lender should be able to assist with locating down payment assistance programs and if they aren’t able to do that then maybe you need to find another lender,” Carolina Bellagio advised in the comments. So what if you do find that you need a new loan officer or real estate agent? Baptiste wondered this, too, in her post: “I’m already preapproved (< 2 weeks now) and built some rapport with the two, is it too late to find a new LO and Relator?” The answer to this question is a bit complicated. If you choose to drop your loan officer, and in turn your lender, no matter when you do it, you will have to start the application process over, so it’s really a matter of whether or not you are willing to do all of that and how quickly you need to get it done by. It could delay the closing and cause you to lose your deposit or the transaction to fall through. This is a decision that should be well thought out, and you should probably speak to an attorney or broker before doing so. At the end of the day, the risk could be higher than the reward.