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Cash to Close: What You Actually Need at Closing
Short answer
Cash to close is the total you bring to closing: the down payment, closing costs and prepaid items, minus any credits and the earnest money you already paid. Most buyers overestimate the down payment and forget the rest. Your Loan Estimate lists every piece, line by line.
Chris Lamm, NMLS# 209221Published Last reviewed
What cash to close includes
- Down payment. It depends on the loan. Some loans need little or none.
- Closing costs. Lender, title, escrow, appraisal and recording fees.
- Prepaid items. Your first year of homeowners insurance, a few months of property tax, and interest to the end of the month.
- Reserves. Some loans want savings left over after closing. That money stays in your account.
Earnest money you already paid and any seller or lender credits come off the total.
Who this guide fits
Buyers building a budget who want to know the real number, not only the down payment. It is also useful if family plans to help, or if you are counting on a seller credit or an assistance program to close the gap.
Ways buyers cover it
- Gift funds from family, documented with a gift letter.
- Seller credits negotiated in your offer to cover closing costs.
- Lender credits, which trade a higher interest rate for lower upfront costs.
- Assistance programs. See the down payment help guide.
- Low and no down payment loans such as VA, USDA, FHA and some conventional options. Which one fits depends on your situation.
What to gather
- A list of where your money is today: checking, savings, retirement and cash
- Two months of statements for each account, every page
- An explanation for any large deposit that is not a paycheck
- If family is gifting money: their statements too, and a signed gift letter
Leave money where it is. Moving it between accounts makes it harder to document.
Common snags
- Cash that was never in a bank. Cash kept at home is very hard to document. Ask the lender how to document its source before moving or depositing it. Waiting does not guarantee the funds will be acceptable.
- Large deposits with no paper trail. Every one needs a source.
- A gift that arrives late. Gift funds need a letter and a record of the transfer before closing.
- Retirement withdrawals. They take time to process and may have tax effects. Ask your plan and a tax professional first.
- Spending down to zero. Leave room for moving costs, repairs and normal life after you close.
Your next step
Add up what you have and where it is. On a first call we can turn that into a realistic estimate for the price range and loan type you are considering.
When you want to talk it through, book a short phone call with Zak on Chris Lamm’s team at MortgageOne. No credit check is needed for a first call, and you can bring as many questions as you like.
General education, not a loan offer or a commitment to lend. To talk through your own situation, book a short phone call at reddinglender.com/schedule or call (530) 282-1166.
Private lender. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs or any government agency.
Common questions
Is cash to close the same as the down payment?
No. The down payment is one part. Cash to close also includes closing costs and prepaid insurance, taxes and interest, minus any credits and earnest money already paid.
When do I find out the exact amount?
Your Loan Estimate gives an early itemized estimate. For most closed-end mortgages, you must receive the initial Closing Disclosure at least three business days before consummation. Review any updated disclosure for changes to cash to close.
Can closing costs be added to the loan?
On a purchase, closing costs are usually covered by cash, seller credits or lender credits. On a refinance they can often be included in the new loan when there is enough equity.
Written by Chris Lamm
Senior Loan Advisor and Branch Manager, MortgageOne Inc. NMLS# 209221. 25 years in mortgage lending.
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