Quick answer
Your down payment is the part of the purchase price you pay yourself. It becomes equity in the home and lowers the amount you borrow. Closing costs are the fees for making the loan and transferring the property, such as the appraisal, title insurance, recording fees and Tennessee’s transfer tax. They don’t reduce your loan balance.
You pay both at closing, and most buyers bring them in one wire. Closing costs commonly run about 2% to 5% of the price. The minimum down payment depends on the loan, from 0% to 3.5% or more.
Rules and tax rates on this page were verified in . Agency guidelines and lender requirements can change. See the CFPB’s Loan Estimate explainer for how both amounts are disclosed.
At a glance: closing costs vs. down payment
- Down payment: Your share of the price; it builds equity and lowers the loan amount
- Closing costs: Fees for the loan, title, taxes and recording; no equity
- Typical closing costs: About 2%–5% of the price, per Freddie Mac
- Minimum down: 0% (VA, USDA), 3% (some conventional), 3.5% (FHA)
- Tennessee taxes: Transfer tax of $0.37 per $100 of price; mortgage tax of $0.115 per $100 of the loan above $2,000
- When: Both are due at closing; earnest money already paid is credited
What is the difference between closing costs and a down payment?
The down payment buys part of the house. Closing costs pay for the transaction. Both come due at the same closing table, so they are easy to confuse, but they behave differently:
| Down payment | Closing costs | |
|---|---|---|
| What it pays for | Part of the purchase price | Loan, title, appraisal, government and prepaid charges |
| Builds equity? | Yes, dollar for dollar | No |
| Lowers the loan amount? | Yes | No (unless a fee is financed, which raises it) |
| Based on | The purchase price and the loan program’s minimum | The loan amount, the price, and flat fees |
| Can the seller pay it? | No | Often in part, within loan-program limits |
| Where you see it | Loan Estimate and Closing Disclosure | Loan Estimate and Closing Disclosure, itemized |
Closing costs are not part of the down payment, and the down payment is not part of the loan amount. On your Loan Estimate, both land in a single “Cash to Close” figure, which is why many buyers think of them as one number.
What is included in closing costs?
- Lender and broker charges: origination or processing fees, any discount points, credit report.
- Third-party services: appraisal, title search, lender’s title insurance, settlement or closing fee, survey if required, flood certification.
- Government charges: Tennessee’s realty transfer tax and mortgage (indebtedness) tax, plus county recording fees.
- Prepaid items and escrow deposits: the first year of homeowners insurance, interest from closing to the end of the month, and a cushion of property taxes and insurance for your escrow account.
- Optional items: owner’s title insurance and a home inspection, if you choose them.
Some program fees are usually financed rather than paid in cash. Examples are FHA’s upfront mortgage insurance premium (1.75% of the base loan), the VA funding fee and USDA’s 1% guarantee fee. Financed fees raise your loan amount instead of your cash to close. Program terms are subject to HUD, VA and USDA guidelines and may change.
How much are closing costs and the down payment?
Freddie Mac tells buyers to be prepared to pay between 2% and 5% of the purchase price in closing costs. Where you land in that range depends on the loan amount, the title premium, whether you buy points, and how much escrow the lender collects.
Minimum down payments are set by each loan program:
| Loan type | Minimum down payment | Notes |
|---|---|---|
| VA | 0% | Eligible veterans, service members and some surviving spouses; funding fee usually financed, waived for many disabled veterans |
| USDA | 0% | Eligible rural areas and household income limits |
| Conventional | 3% on some first-time and income-based programs; 5% is common | Below 20% down usually means private mortgage insurance |
| FHA | 3.5% with a credit score of 580 or higher; 10% from 500 to 579 | Upfront and annual mortgage insurance |
Program terms and eligibility are subject to VA, USDA, HUD, Fannie Mae, Freddie Mac and lender guidelines and may change. Down payment assistance, such as THDA’s programs, can cover part of either amount for eligible buyers.
What Tennessee taxes are in closing costs?
Two state taxes show up on nearly every Tennessee purchase with a mortgage, both under Tenn. Code § 67-4-409:
- Realty transfer tax: $0.37 per $100 of the price or value, whichever is greater. The law places it on the buyer (grantee), but your contract can shift it.
- Mortgage (indebtedness) tax: $0.115 per $100 of the loan amount above the first $2,000, paid by the borrower.
County register of deeds offices also charge recording fees for the deed and the deed of trust.
What does this look like on a $350,000 Robertson County home?
Here is an illustrative conventional purchase with 5% down in Robertson County:
| Item | Amount | Builds equity? |
|---|---|---|
| Purchase price | $350,000 | |
| Down payment (5%) | $17,500 | Yes |
| Loan amount | $332,500 | |
| Tennessee transfer tax ($350,000 × 0.37%) | $1,295 | No |
| Tennessee mortgage tax ($330,500 × 0.115%) | $380 | No |
| All closing costs at 2%–5% of price (includes the two taxes) | $7,000–$17,500 | No |
| Estimated cash to close before credits | $24,500–$35,000 |
Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Your Loan Estimate shows your actual figures; earnest money and any seller or lender credits reduce the cash you bring.
Can the seller pay your closing costs?
Often, in part. A seller can agree to pay some of your closing costs and prepaid items, up to the loan program’s limit. A seller can never pay your down payment. Seller-paid closing costs and interested-party contributions vary by loan type and transaction. The limits below are general examples and do not mean every type of cost or concession is permitted up to that percentage.
| Loan type | General limit on seller contributions |
|---|---|
| Conventional (primary home) | 3% with less than 10% down; 6% with 10%–25% down; 9% with more than 25% down |
| FHA | 6% of the sales price |
| VA | Customary closing costs, plus a separate cap of 4% on concessions |
| USDA | 6% of the sales price |
Sources: Fannie Mae Selling Guide B3-4.1-02; HUD Handbook 4000.1; VA Lender’s Handbook; USDA HB-1-3555. Subject to agency and lender guidelines and may change.
Lender credits can also offset closing costs. They vary with the rate, the program, lender pricing and market conditions. With enough seller credits, lender credits, assistance and eligible financed costs, some borrowers have very little cash due at closing.
When do you pay closing costs and the down payment?
- At contract: earnest money goes to the title company or brokerage holding it. It is credited toward your cash to close.
- During the loan: some lenders collect the appraisal fee upfront. It shows as paid outside closing.
- Three business days before closing: you receive your Closing Disclosure, which shows the final cash to close.
- At closing: the remaining down payment and closing costs arrive at the title company as one amount, by wire or cashier’s check.
Your closing takes place at a local title company, chosen by you or by your real estate agent if you have no preference.
How do you pay the down payment at closing?
- Wire transfer is the most common method. Before you send anything, call the title company at a number you already have and confirm the wiring instructions. Never use instructions sent by email alone. The CFPB warns that closing-fund wire fraud targets buyers in the last days before closing.
- Cashier’s check is accepted by many title companies, but some cap the amount. Ask in advance.
- Gift funds from family are allowed on most loans with a signed gift letter and a paper trail showing the transfer.
- Retirement account funds can be used, but withdrawals and loans have tax and penalty rules. Talk with a tax advisor first.
Large deposits that are new to your bank statements will need documentation, so move money early and keep the receipts.
Closing costs and down payment FAQ
Are closing costs included in the down payment?
No. The down payment is your share of the purchase price, and closing costs are separate fees for the loan and the transfer. Both are paid at closing, and your Loan Estimate and Closing Disclosure combine them into one “Cash to Close” figure, but each is itemized on its own line.
Is the down payment included in the loan amount?
No. The down payment reduces the loan amount. On a $350,000 home with 5% down, you pay $17,500 and borrow $332,500. A larger down payment can lower or remove mortgage insurance and may improve pricing, depending on the program.
Are closing costs based on the loan amount or the purchase price?
Both, plus flat fees. Tennessee’s transfer tax and the owner’s title policy follow the price. The mortgage tax, lender’s title policy and any points follow the loan amount. Appraisal, recording and settlement fees are mostly flat.
Can closing costs be rolled into the loan?
On a purchase, usually not directly, apart from program fees such as FHA upfront mortgage insurance, the VA funding fee or the USDA guarantee fee. Seller credits and lender credits are the usual ways to reduce cash at closing. On a refinance, closing costs can often be included in the new loan.
Do I still pay closing costs with a 0% down loan?
Yes. VA and USDA loans remove the down payment, not the closing costs. Seller concessions, lender credits and assistance programs can cover some or all of them, depending on the program’s limits.
Where these figures come from
| Figure | Source | As of |
|---|---|---|
| Closing costs of 2%–5% of the price | Freddie Mac, My Home | Retrieved Oct 26, 2026 |
| Tennessee transfer tax, $0.37 per $100 | UT CTAS, Tenn. Code § 67-4-409(a) | Retrieved Oct 26, 2026 |
| Tennessee mortgage tax, $0.115 per $100 above $2,000 | UT CTAS, Tenn. Code § 67-4-409(b) | Retrieved Oct 26, 2026 |
| Conventional seller-contribution limits | Fannie Mae Selling Guide B3-4.1-02 | Retrieved Oct 26, 2026 |
| FHA down payment and seller limits | HUD Handbook 4000.1 | Current handbook |
| Loan Estimate and Closing Disclosure timing | Regulation Z §1026.19 | Retrieved Oct 26, 2026 |
Related guides
- Can you buy a home with no down payment in Tennessee?
- Tennessee first-time homebuyer programs and down payment assistance.
- What is a home appraisal, and what if it comes in low?
- Conventional, FHA, VA and USDA loan program pages.
- Robertson County mortgage guide.
- About Christopher Armantrout, the licensed originator who wrote this page.
Want your own cash-to-close number? Talk to Valor Mortgage.
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Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.