The Mortgage Plug guide
Closing costs explained
Understand closing costs, down payment, prepaids, and cash to close.
Reviewed October 29, 2026 · Atiyah Jemison · NMLS #2162831
What are closing costs?
Closing costs are charges related to getting the loan and completing the transaction. These can include origination, appraisal, title services, recording, and other charges. Amounts depend on the loan, property, contract, location, and selected services.
Know the different categories
Your down payment is the purchase price you pay rather than finance. Prepaids cover items collected in advance, such as daily interest, insurance, or taxes. Initial escrow deposits may also apply. Cash to close is the final amount due after down payment, closing costs, prepaids, deposits, credits, and adjustments.
Interest rate, APR, and points
The interest rate is charged on your loan balance. APR is a broader borrowing-cost measure that includes the interest rate and certain charges. Discount points are upfront charges that may lower the rate. Compare both upfront cost and how long you expect to keep the loan.
Review the final details
Review your Loan Estimate and Closing Disclosure, ask about unfamiliar costs, and compare meaningful changes. Confirm wire instructions using a trusted phone number, not an unexpected email or text.
Sources & next steps
Educational guidance only. Eligibility, documentation, loan terms, and property requirements vary by program and underwriting. Use a secure application or approved portal, never email or text, for sensitive financial documents.