Understanding Closing Costs When Buying or Refinancing in Seattle

Planning to buy a home or refinance in Seattle or elsewhere in Washington State? Your budget should account for more than the down payment and monthly mortgage payment. Closing fees, prepaid expenses and funds needed for an escrow account can also affect how much money you need to complete your loan.

Understanding these amounts early helps you compare financing options and prepare for closing with greater confidence.

Key Takeaways

• Closing costs and your down payment are separate expenses.
• Prepaid insurance, interest and escrow deposits differ from fees charged to obtain the loan.
• Your Loan Estimate and Closing Disclosure help you review costs and cash to close.
• Seller credits and lender credits may reduce upfront cash, but conditions and tradeoffs apply.
• Independently verify wiring instructions before sending closing funds.

What Are Closing Costs?

Closing costs are charges associated with arranging your mortgage and completing the transaction. On a purchase, responsibility for expenses between the buyer and seller depends on the purchase agreement, applicable requirements and negotiated terms.

For planning purposes, separate your expenses into three groups.

1. Loan Charges

These may include:

• Origination, processing or underwriting charges, depending on the loan.
• Appraisal and credit-report fees.
• Discount points, if you select an option that involves paying points to reduce the interest rate.
• Applicable upfront mortgage insurance or government-program charges.

Learn more about loan-related closing costs. Some charges may be paid before closing, so track amounts already paid to avoid counting them twice.

2. Title, Escrow and Settlement Charges

These may include:

• Title insurance and related title services.
• Escrow and settlement services.
• County recording fees and other applicable transaction charges.
• Transfer taxes, where applicable to the transaction and allocated to you.

The lender’s title policy and an owner’s title policy protect different interests. Ask which policies are included and who is responsible for each expense under your agreement.

3. Prepaid Expenses and Escrow Deposits

These amounts may appear within the closing-cost totals on your disclosures, but they serve a different purpose from lender and settlement fees:

• Homeowners insurance: Premiums that must be paid in advance. Learn about insurance at closing.
• Prepaid interest: Interest covering the applicable period between loan funding and the start of your regular payment cycle.
• Property taxes: Payments or adjustments based on the tax schedule and transaction timing. Read about property taxes and closing costs.
• Initial escrow deposits: Funds collected to establish an escrow or impound account for future tax and insurance bills, when required or selected.

Private mortgage insurance (PMI) may also apply to certain conventional loans. Whether mortgage insurance is paid monthly, upfront or through another arrangement depends on the program and selected option.

Closing Costs vs. Cash to Close

Cash to close is the amount you need to provide to complete the transaction after accounting for your down payment, closing costs, deposits already paid, credits and other adjustments.

Here is a hypothetical purchase example:

This example assumes no other adjustments. Your actual figures will appear on your disclosures.

Keep a separate budget for moving, inspections paid outside closing, immediate maintenance and savings you want to retain after purchasing. Any required reserves are generally funds you must document having available, rather than an additional fee paid to the lender.

Review Your Loan Estimate and Closing Disclosure

For most standard purchase and refinance mortgages, the lender must provide a Loan Estimate (LE) within three business days after receiving your application. It outlines estimated loan terms, payments, closing costs and cash to close. A Loan Estimate is not a loan approval.

You generally must receive the Closing Disclosure (CD) at least three business days before consummation—the point when you become contractually obligated on the loan. This gives you time to compare the figures with your most recent Loan Estimate and ask questions.

Different disclosure rules apply to products such as HELOCs and reverse mortgages.

Certain charges are subject to tolerance limits, while other amounts can change under applicable rules. Ask about any difference rather than assuming every estimate is fixed or every increase is permitted.

Tips for Comparing Mortgage Costs

Compare loan options using the same loan amount, loan type, repayment term and rate-lock period whenever possible. Then review:

• Interest rate and points: A lower rate may require a larger upfront payment.
• Lender charges and credits: Compare these together rather than focusing on one fee.
• Mortgage insurance: Include both upfront charges and ongoing payments, if applicable.
• Taxes, insurance and escrow deposits: Differences may reflect estimates or timing rather than actual savings.
• Monthly payment and longer-term cost: Consider how long you expect to keep the loan.

For a line-by-line explanation of the form, review the CFPB’s Loan Estimate guide for comparing mortgage costs.

Lower cash to close does not necessarily mean a lower-cost loan. Ask for an explanation of the tradeoffs before selecting an option.

Ways to Manage Your Upfront Costs

Discuss seller credits. On a purchase, negotiated seller assistance may cover eligible expenses. Limits depend on the loan program and transaction; credits generally cannot replace your required down payment.

Understand lender credits. These may reduce upfront expenses, often in exchange for a higher interest rate. Compare the ongoing payment with the initial benefit.

Ask about financed costs. Some refinance expenses may be included in the loan balance when permitted. This increases what you owe and can increase total interest expense.

Review services you can shop for. Your Loan Estimate identifies certain services for which shopping is permitted. Coordinate provider selections with your lender and escrow company.

A “no-closing-cost” option does not necessarily eliminate costs. Ask whether expenses are covered through lender credits, included in the loan balance or handled through another arrangement.

What Is Different When Refinancing?

A refinance typically does not involve a purchase down payment, but it can still include loan charges, title and escrow services, prepaid interest and funding for a new escrow account.

If your existing mortgage has an escrow balance, ask how and when that money will be returned or otherwise handled. Do not assume it will be available to cover your new loan’s closing expenses.

Compare the full cost of refinancing with the expected benefit and how long you anticipate keeping the loan. A lower payment alone does not establish overall savings, particularly if the new loan extends your repayment period.

A Simple Checklist Before Closing

Before providing your final funds:

• Compare your Closing Disclosure with your most recent Loan Estimate.
• Confirm the loan amount, interest rate, payment and any points or lender credits.
• Check that earnest money and negotiated credits are accurately reflected.
• Ask about unfamiliar charges or changes.
• Confirm the final amount due and acceptable payment method with escrow.
• Follow your lender’s instructions for documenting funds and transfers.

Protect Your Closing Funds

Before wiring money, verify the account details directly with your escrow company using a trusted phone number you established independently.

Do not rely on a new number or revised instructions supplied in an unexpected email or text. If you suspect you sent money to the wrong account, contact your bank immediately.

Frequently Asked Questions

How much should I budget for closing costs?

Request an itemized estimate based on your loan amount, property, program and expected closing date. A general percentage can be misleading because points, insurance, taxes and escrow deposits vary.

Is earnest money an additional closing cost?

Earnest money is a deposit made under your purchase agreement. When properly credited at closing, it reduces the remaining amount you need to bring; it is not a separate lender fee.

Can the seller pay all my closing costs?

Possibly, if the seller agrees and the amount meets your loan program’s limits and eligible-expense requirements. Seller credits generally cannot fund your required down payment, and you should not assume unused credits will be paid to you in cash.

Are discount points required?

Not every loan option includes discount points. Ask to compare available options with different combinations of rate, points and lender credits, then consider how long you expect to keep the loan.

Will closing later in the month save money?

A later funding date may reduce the prepaid interest collected at closing, but it does not automatically reduce your overall borrowing costs. Choose a closing date that works with your contract, rate lock and moving plans.

Plan Ahead for a Clearer Closing

Your most useful estimate is one based on your property, loan program, insurance costs and expected closing date. I can help you review those figures, understand changes and compare financing options before you make a decision.

I’ve been helping borrowers since 2004 and serving the Seattle area since 2006. There is no obligation to apply.

Request a Personalized Financing Review

Prefer to talk it through? Schedule a consultation here.

Additional consumer resources: CFPB guide to mortgage closing documents and protecting your closing funds.

For educational purposes only. Examples are hypothetical. Actual costs, credits, eligibility and financing terms depend on the property, transaction, current lender and program guidelines, and borrower approval. This is not a commitment to lend. Consult your tax or legal adviser as appropriate. Equal Housing Opportunity.