Down payment and closing costs are paid at different times in the home purchase process
Your down payment is due at closing, which is the final step when you sign all documents and the lender transfers money to the seller. Your closing costs are also due at closing. Both amounts are typically wired to the title company or escrow agent a day or two before the closing appointment, though the exact timing depends on your lender and title company.
The confusion happens because you may hear about these costs months before you actually pay them. A real estate agent or lender will quote both numbers early in the process so you know what to expect. But you do not send money until you are ready to close—usually 30 to 45 days after your offer is accepted, depending on your loan type and any inspections or appraisals that need to happen first.
Some costs do come out of your pocket before closing. An inspection, appraisal, or credit report may cost $300 to $800 and is often paid directly to the inspector or appraiser within days of ordering. These are separate from closing costs and are not refunded if you walk away from the deal, though some lenders credit them back at closing if you move forward.
Key Takeaways
- Down payment and closing costs are both paid at the closing appointment, typically by wire transfer one or two days before you sign documents.
- Inspection, appraisal, and credit report fees may be paid weeks earlier directly to the service provider, and these are separate from closing costs.
- Your lender will send you a Closing Disclosure at least three business days before closing, showing the exact down payment and closing cost amounts you owe.
- If you cannot cover the full down payment and closing costs in cash, some lenders allow you to roll closing costs into the loan or use a gift from a family member for the down payment.
- Earnest money (a deposit showing you are serious about the purchase) is typically held by the title company and credited toward your down payment at closing.
What happens between offer and closing
After your offer is accepted, your lender orders an appraisal to confirm the home is worth what you are paying. You may pay the appraisal fee upfront—usually $400 to $700—or your lender may collect it at closing. A home inspection is your choice and costs $300 to $500; you pay the inspector directly when you schedule it. Both of these happen in the first two weeks after your offer is accepted.
During this same period, the title company begins a title search to make sure the seller actually owns the property and there are no liens or claims against it. You do not pay for this separately; it is included in your closing costs. The lender also orders a credit report, which costs $20 to $50 and is usually paid at closing.
Your lender will give you a Loan Estimate within three business days of your application. This document shows the estimated down payment, closing costs, and monthly payment. These numbers may shift slightly before closing, but they give you a solid picture of what you will owe. The final numbers appear on the Closing Disclosure, which you receive at least three business days before closing.
Earnest money and how it applies to your down payment
Earnest money is a deposit—usually 1 to 3 percent of the purchase price—that you submit with your offer to show the seller you are serious. For a $300,000 home, earnest money might be $3,000 to $9,000. You write this check to the title company or escrow agent, not to the seller, and it is held in a trust account until closing.
At closing, your earnest money is credited toward your down payment. If your down payment is $60,000 and you put down $5,000 in earnest money, you owe $55,000 at closing. If the deal falls through because the inspection reveals major problems or the appraisal comes in low, you may get your earnest money back, depending on the reason and your purchase agreement. If you walk away without a valid reason, the seller typically keeps it.
Some sellers ask for a larger earnest money deposit in a competitive market to prove you are committed. This does not change your total down payment—it just means more of it is already in escrow before closing day.
How to get the exact amounts before closing day
Your lender is required to send you a Closing Disclosure at least three business days before your closing appointment. This is a five-page form that lists every cost you will pay, including the down payment amount, all closing costs broken down by category, and your monthly payment. Read it carefully and compare it to the Loan Estimate you received earlier. If numbers have changed significantly, ask your lender why.
The Closing Disclosure also shows which costs the seller is paying (such as their real estate agent commission) and which you are paying. Some sellers agree to pay part of your closing costs as part of the negotiation, and this will appear on the form. If you see costs you do not recognize, ask before closing day—do not wait until you are sitting at the closing table.
Your title company will also send you a settlement statement (sometimes called a HUD-1 or a closing statement) showing the same information in a different format. Between the Closing Disclosure and the settlement statement, you will have a complete picture of what you owe and where every dollar is going.
Wire transfer timing and what to do if you miss the deadline
Your lender or title company will tell you exactly when and where to wire your down payment and closing costs, usually one or two business days before closing. The wire instructions will include a specific account number, routing number, and the exact amount to send. Follow these instructions precisely—a typo in the account number can send your money to the wrong place.
Most lenders require the wire to arrive before 2 p.m. on the day they specify. If you are wiring from your bank, initiate the transfer at least one business day early to account for processing time. Some banks charge a wire fee ($15 to $30), which you pay separately.
If your wire does not arrive on time, closing may be delayed by one or more days. If you cannot wire the funds by the deadline, contact your lender immediately. Some lenders will accept a cashier's check or certified check at the closing table instead, but you must arrange this in advance. Do not assume you can show up with a personal check—most title companies will not accept it.
Options if you cannot pay the full amount in cash
If your down payment and closing costs together are more than you have saved, you have a few options. Some lenders allow you to roll closing costs into the loan, meaning you borrow the closing cost amount as part of your mortgage. This increases your loan amount and your monthly payment, but it means you only need to bring your down payment to closing. Not all loan types allow this, and it may affect your interest rate.
A gift from a family member can cover your down payment but usually not closing costs. Most lenders require a gift letter stating that the money is a gift, not a loan you have to repay. The gift giver does not need to be related to you by blood, but the lender will verify the funds came from their account and ask questions if the money appears suddenly. Closing costs typically cannot be covered by a gift because lenders want to see that you have skin in the game.
Some sellers agree to pay part or all of your closing costs as part of the purchase negotiation. This is called a seller concession. The seller's payment goes directly to the title company at closing, reducing what you owe. There are limits on how much a seller can contribute—usually 3 to 6 percent of the purchase price, depending on your loan type—but this can make a real difference if you are short on cash.
What closing costs actually include
Closing costs typically range from 2 to 5 percent of the loan amount and cover services and fees that have nothing to do with your down payment. They include the lender's origination fee (the cost to process your loan), title insurance (which protects you and the lender if someone later claims ownership of the property), property taxes and homeowners insurance for the first few months, and the title company's fee for handling the closing.
Closing costs also include an appraisal fee (if you have not paid it upfront), a credit report fee, a survey fee (if required), and recording fees (the cost to file your deed with the county). Some of these are paid to third parties; others go to your lender or title company. Your Closing Disclosure breaks down every line item so you know where the money goes.
You cannot avoid closing costs entirely, but you can shop around. Different lenders charge different origination fees, and different title companies charge different rates. Getting quotes from multiple lenders before you commit can save you hundreds of dollars. However, once you are locked into a lender, the Closing Disclosure should match the Loan Estimate within a small tolerance—if costs have jumped significantly, ask why.
Frequently Asked Questions
Can I pay my down payment before closing day?
No. Your down payment must be wired or delivered at closing, usually one or two days before you sign documents. Earnest money is the only down payment-related amount you pay earlier, and it is held in escrow and credited toward your down payment at closing.
What if the appraisal comes in lower than the purchase price?
If the home appraises for less than you agreed to pay, you have a few options: renegotiate the price with the seller, make up the difference in cash by increasing your down payment, or walk away if your purchase agreement allows it. Your lender will not lend more than the appraised value, so one of these must happen before closing.
Do I have to bring a cashier's check to closing?
No. Most closings use wire transfer because it is faster and safer. Your lender will give you wire instructions days before closing. If you cannot wire funds, ask your lender in advance whether they will accept a cashier's check at the closing table—do not assume.
Can my parents give me money for closing costs?
A gift can cover your down payment with a gift letter, but most lenders do not allow gifts for closing costs. Closing costs must typically come from your own savings or be rolled into the loan. Ask your lender what their specific policy is before you assume a gift will work.
What happens if I wire the wrong amount?
Contact your lender or title company immediately. If you wired too little, you will need to send the difference before closing can happen. If you wired too much, the excess will be returned to you after closing, though it may take several days. Do not wait until closing day to discover a wire error.