Closing Costs & How it’s Used


Closing Costs. This is a word that you may hear as a buyer and have no clue what it even is! To break it down quickly, closing costs are the additional fees or expenses you incur while purchasing a home. This includes homeowners insurance, flood insurance, property taxes, lender fees, title company fees, and discount points (to name a few). 

But, many people want to know HOW these closing costs are used! 

[IMPORTANT READING: What are closing costs?]




In the state of Louisiana, every parish except for Orleans pays its property taxes at the end of the year. When it’s time to close on a house in Orleans parish, you will owe the seller money for their unused portion of the property taxes. Instead of writing a check to the seller, this is bundled into your closing costs fees. 

You should also note that many lenders require you to put some funds into your escrow account to cover property taxes. This will also be part of those expenditures. 




You must pay for your homeowner’s and flood insurance on the front end when purchasing a home. However, some lenders also require you to put two to three months’ worth of insurance costs into your escrow. They like a cushion in case your insurance goes up the following year. If you’re receiving closing cost assistance, it can help pay this upfront insurance cost. 



Discount Points

Discount points are used to help you buy down your interest rate. This, in turn, helps lower your monthly note. If a seller provides closing costs to you, you can apply them towards discount points instead of other items! Talk to your lender about this option! 

[IMPORTANT READING: What are discount points?]




The other expenses you have for the closing include lender fees, title fees, and title insurance – to name a few. When asking for closing costs assistance, talk with your lender about how this money will be used to ensure it benefits you the best way! 



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