Suppose you’re buying a $400,000 home in the city of Richmond. That round figure is for illustration; check current city-wide medians from Zillow Richmond and Virginia REALTORS, which move month to month. With 3.5% down on an FHA loan, your down payment is $14,000. With 5% down on a conventional loan, it’s $20,000. The home is identical, but the cash-to-close totals differ by thousands once program-specific costs are added. This guide shows you how to read a closing cost estimate sheet, officially called the Loan Estimate, line by line, spot errors, and compare two offers.
Before you start, gather your Loan Estimate (or a NoTouch Credit Pull soft-pull pre-approval to generate one), your purchase contract, and the loan program you’re using. By Duane Buziak, NMLS #1110647.
- Step 1: Get a Loan Estimate and Confirm the Loan Program Behind It
- Step 2: Read Page 1, Rate, Payment, and the Cash-to-Close Figure
- Step 3: Break Down Sections A, B, and C
- Step 4: Identify Taxes, Government Fees, and Prepaids in Sections E, F, and G
- Step 5: Account for Program-Specific Costs
- Step 6: Work Through a Dollar Example and Test Ways to Lower Cash to Close
- Step 7: Compare Two Estimates Side by Side and Track Changes Before Closing
- Before You Sign: The Four Checks That Matter
- Closing Cost Estimate Sheet FAQs
Step 1: Get a Loan Estimate and Confirm the Loan Program Behind It
Under the federal rule explained on the CFPB’s Loan Estimate page, a lender must deliver a Loan Estimate within three business days of receiving a complete application. A complete application means name, income, Social Security number, property address, estimated value, and loan amount. The form is standardized, so any two lenders’ estimates have the same layout.
The first thing to confirm is the program printed on page 1 under “Loan Type” and the loan purpose. VA, FHA, and Conventional each carry different costs. A VA loan may include a funding fee, an FHA loan includes upfront mortgage insurance premium (MIP), and a conventional loan may carry private mortgage insurance (PMI). If the program is wrong, every number below it is wrong.
A common mistake: treating a closing cost estimate sheet from a website calculator as if it were a Loan Estimate. Calculators use averages and assumptions. They aren’t tied to your application, they don’t follow the official form, and the fee tolerance protections covered in Step 7 apply only to the real Loan Estimate.
If you don’t have one yet, Duane Buziak can start you with a NoTouch Credit Pull, a soft-pull pre-approval. It uses real income and asset inputs without a hard inquiry on your credit, so the first estimate you receive reflects your actual situation rather than a generic scenario.
Step 2: Read Page 1, Rate, Payment, and the Cash-to-Close Figure
Page 1 is the summary. Work through it in this order:
- Interest rate: check whether the form says the rate can increase. A fixed-rate loan says no.
- Monthly principal and interest: this is the loan payment alone, before taxes and insurance.
- Estimated total monthly payment: this adds mortgage insurance and escrowed taxes and homeowners insurance. This is the number to compare against your budget.
- Estimated Closing Costs: the total of the fees and prepaids detailed on page 2.
- Estimated Cash to Close: the amount you bring to the table.
Cash to close is not the same as closing costs. It also includes your down payment, any deposits you’ve already paid, seller credits, lender credits, and any fees financed into the loan. People who assume closing costs equal the down payment, or that cash to close equals closing costs, are often surprised in both directions.
Next, check the rate lock. The form should state whether the rate is locked and the date the lock expires. If your closing date falls after that date, you need a longer lock or an extension, and extensions can cost money. Ask what happens if the contract date slips.
You’ll sometimes hear a rule of thumb that closing costs run “a few percent” of the loan amount. Treat that as a loose sanity check only. Actual totals depend on the program, the lender, taxes, and prepaids, so rely on your own Loan Estimate, not a percentage.
Step 3: Break Down Sections A, B, and C
Page 2 groups costs into lettered sections. Start with the three that cover lender and service charges.
Section A: Origination Charges
These are what the lender or broker charges to make the loan. Typical lines include an origination fee, underwriting fee, and processing fee. Discount points also appear here. A point is prepaid interest equal to 1% of the loan amount, paid up front in exchange for a lower interest rate. If a lender credit appears here as a negative number, it offsets costs in exchange for a higher rate.
Sections B and C: Services
Section B lists services you cannot shop for, such as the appraisal, credit report, and flood certification. The lender picks the provider. Section C lists services you can shop for, including title insurance and settlement services, and a survey or pest inspection if required. If you choose your own title company from the lender’s written list, the numbers may differ from those on the estimate, so get a quote and ask for a revised Loan Estimate.
VA-Specific Limits
VA rules restrict which fees a veteran may be charged. The VA’s funding fee and closing costs page explains which closing costs may be paid by the veteran and which must be covered by others. If a VA Loan Estimate shows a fee you don’t recognize, ask whether it’s an allowable charge.
Fees to Question
Flag any line labeled “administrative,” “processing” duplicates, or other vague charges that don’t map to a specific service. Ask what the fee covers and who receives it. A legitimate fee has a clear answer, and a lender should be willing to explain every line or remove it.
Step 4: Identify Taxes, Government Fees, and Prepaids in Sections E, F, and G
Section E covers taxes and government fees: recording fees and Virginia transfer and recordation taxes. In Virginia, the buyer customarily pays to record the deed and the deed of trust (the lender’s lien), while the seller customarily pays the grantor’s transfer tax. Rates and custom can change, and your contract can alter who pays, so confirm current Virginia figures with your title company as of 2026 rather than relying on a general rule.
Section F lists prepaids, costs you pay in advance for things that belong to the first months of ownership:
- Homeowners insurance premium: usually 12 months, paid at closing.
- Prepaid interest: daily interest from your closing date through the end of that month. Mortgage payments are made in arrears, so your first payment typically falls the month after the first full month.
Closing date timing matters here. Closing on the 28th means only a few days of prepaid interest, while closing on the 3rd means nearly a month. Total cost over the life of the loan isn’t higher, because you skip a payment month in the first case and pay it up front in the second, but cash to close changes noticeably.
Section G is the initial escrow deposit: a cushion of property tax and insurance payments the servicer holds. The number of months depends on your closing date and when bills come due. Lenders and servicers have limits on how large the cushion may be, so if the figure looks high, ask for the escrow calculation.
A common mistake: treating escrow deposits as fees. They’re your own money, held in an account and applied to your future tax and insurance bills. They raise cash to close, but they aren’t a cost of the loan.
Step 5: Account for Program-Specific Costs
This is where VA, FHA, and conventional estimates diverge. Figures below are as of 2026; confirm them against your own estimate.
VA funding fee. The fee is a percentage of the loan and depends on down payment and whether it’s your first or a subsequent use. For first use, it has been 2.15% with less than 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more down. For subsequent use with less than 5% down, it has been 3.3%. Veterans receiving VA disability compensation are generally exempt, and so are certain other eligible borrowers. The fee can be financed into the loan. See the VA’s funding fee page for the current schedule.
FHA mortgage insurance. FHA charges an upfront MIP, 1.75% of the base loan amount, which can be financed, plus an annual MIP built into the monthly payment. Annual rates depend on loan term, amount, and loan-to-value. Check HUD’s FHA loan resources for the current schedule.
Conventional PMI. With under 20% down, conventional loans typically carry PMI, usually as a monthly premium with no upfront cost. The rate varies with credit score and down payment, and it can be removed once your equity reaches the required level. For loan limits, the 2026 conforming limit for a one-unit home is $832,750; confirm at FHFA.gov.
| Feature | VA Loan | FHA Loan | Conventional Loan |
|---|---|---|---|
| Minimum down payment | 0% for eligible borrowers | 3.5% with qualifying credit | As low as 3% on some programs; 5% is common |
| Upfront insurance or fee | Funding fee (2.15% first use, under 5% down); exempt with VA disability compensation | Upfront MIP of 1.75% of base loan, financeable | Typically none |
| Monthly mortgage insurance | None | Annual MIP in monthly payment | PMI if under 20% down; removable |
| Credit considerations | Set by individual lender; no VA-mandated minimum score | Lower scores accepted; down payment tied to score | PMI cost rises as score falls |
Whichever program you’re using, find the line on your estimate where the financed amount appears, because financed fees raise the loan balance and the interest you pay on it.
Step 6: Work Through a Dollar Example and Test Ways to Lower Cash to Close
Use the $400,000 illustration from the opening. These fee amounts are assumptions to show the mechanics, not quotes: lender fees $2,400, Section B services $1,100, title $2,200, taxes and recording $1,400, prepaids $2,400 (insurance $1,500 and interest $900), and escrow deposit $2,300. That’s $11,800 in closing costs for every scenario.
- FHA, 3.5% down: down payment $14,000. Base loan $386,000. Upfront MIP at 1.75% is $6,755, financed, making the loan $392,755. Cash to close: $14,000 + $11,800 = $25,800. Annual MIP at 0.55% on the base loan is about $177 a month.
- Conventional, 5% down: down payment $20,000. Loan $380,000, no upfront insurance. Cash to close: $20,000 + $11,800 = $31,800, which is $6,000 more than FHA. PMI is added monthly based on credit.
- VA, 0% down, first use: loan before fee $400,000. Funding fee at 2.15% is $8,600, financed, making the loan $408,600. Cash to close: $11,800. With a disability exemption, the fee drops to $0 and the loan stays at $400,000.
Ways to Lower Cash to Close
- Seller concessions: limits vary by program. FHA allows up to 6% of the price, VA allows up to 4% for concessions beyond customary costs, and conventional limits depend on down payment (3% when the loan-to-value is above 90%). Verify against HUD, the VA, and Fannie Mae guidance before negotiating.
- Lender credits: a higher rate in exchange for a credit toward costs. Duane Buziak can structure no-out-of-pocket closing options within program rules.
- Buying fewer points: skip points if cash is tight.
For points, use the break-even formula: cost of points divided by monthly savings. One point on $380,000 costs $3,800. If it saves $60 a month, break-even is about 63 months. If you may move or refinance sooner, skip it.
A common mistake: choosing lender credits without checking the effect on the monthly payment. A lower cash-to-close figure with a higher rate means paying more every month for years. Also, confirm with Duane before layering any assistance program on top of credits, since each program limits what can be combined.
Step 7: Compare Two Estimates Side by Side and Track Changes Before Closing
Lower closing costs don’t automatically mean a better deal, so match like for like. Both estimates should use the same program, loan amount, rate lock period, and points. Then compare:
- Section A totals: the lender’s own charges.
- Section D totals: total loan costs (Sections A, B, and C).
- Interest rate and monthly payment on page 1.
- APR on page 3: it folds interest and certain fees into one yearly rate and helps expose an offer that trades a low rate for high fees.
If you have a competing Loan Estimate, take the Dare to Compare approach: send it to Duane Buziak for a line-by-line review. You’ll see which differences come from the program or lock and which come from the fees.
Tolerance Rules
The CFPB sets limits on how far fees can move between the Loan Estimate and closing, described on its Closing Disclosure page. Some charges cannot increase at all, including the lender’s origination charges and fees for services you can’t shop for. Some can rise by a combined 10%, such as recording fees and services you shopped for from the lender’s list. Others can change, such as prepaid interest, insurance premiums, and escrow deposits.
Check the Closing Disclosure
You must receive the Closing Disclosure at least three business days before closing. Compare it to your latest Loan Estimate. If a fee in a zero-tolerance category rose, or the 10% group grew beyond its limit, ask for a corrected version. Don’t wait until the closing table, when the pressure to sign is highest.
Before You Sign: The Four Checks That Matter
- Program: VA, FHA, or Conventional on page 1 matches what you intended.
- Lock: the rate is locked and the expiration date falls after closing.
- Cash to close: the number includes your down payment, deposits, and credits, and you’ve verified the funds.
- Tolerance: the Closing Disclosure matches the Loan Estimate within the permitted limits.
Whether you’re a veteran ready to use your hard-earned benefits or a homebuyer exploring your financing options, your path to homeownership starts with expert guidance you can trust. Connect with Duane today for a personalized consultation and discover the mortgage solution tailored to your unique goals in the Stafford County and Richmond area. Call Richmond Home Loans by Duane Buziak at (804) 212-8663, or start with a NoTouch Credit Pull to get an estimate built on your real numbers.
Closing Cost Estimate Sheet FAQs
What is a closing cost estimate sheet?
A closing cost estimate sheet is the Loan Estimate, a standardized three-page form that lists your projected rate, payment, closing costs, and cash to close.
How soon must a lender give me a Loan Estimate?
A lender must provide it within three business days of receiving a complete application, according to the CFPB.
What is the difference between a Loan Estimate and a Closing Disclosure?
The Loan Estimate is the early projection, while the Closing Disclosure is the final statement of terms and costs you must receive at least three business days before closing.
Is cash to close the same as closing costs?
No, cash to close also includes your down payment, deposits, and credits, so it can be much larger or smaller than closing costs alone.
Are escrow deposits a closing fee?
No, escrow deposits are your own money held to pay future property tax and insurance bills.
Do VA loans have closing costs?
Yes, VA loans have closing costs and usually a funding fee, though the VA limits which fees a veteran may be charged and disabled veterans are generally exempt from the funding fee.
Can FHA mortgage insurance be financed?
Yes, the upfront MIP (1.75% of the base loan as of 2026) can be financed into the loan, while annual MIP is paid monthly.
Does conventional PMI have an upfront cost?
Usually not, since conventional PMI is typically a monthly premium that varies with credit score and down payment.
Can the seller pay my closing costs?
Yes, within program limits, which differ for FHA, VA, and conventional loans and depend on the down payment.
Can fees change between the Loan Estimate and closing?
Some can, but CFPB tolerance rules bar increases on certain fees, cap others at a combined 10%, and allow the rest to change.
This information is not intended to be an indication of loan qualification, loan approval or commitment to lend.
Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA | UWM PRO ELITE 2025 | Scotsman Guide Top Originator 2025 & 2026 | VA Broker of the Year 2024-2025 | Top 1% Nationwide | Coast2Coast Mortgage | DuaneBuziakMortgageMaestro.com | duane@coast2coastml.com | (804) 212-8663
Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC, NMLS #376205 | Licensed in VA · FL · TN · GA · DC · NC · SC · MD | Verify licensing at the NMLS Consumer Access site.