Understanding Cash to Close

What the number includes

Cash to close is everything you bring to the closing table: your down payment, plus closing costs (lender fees, title, escrow, recording), plus prepaid items (property taxes, homeowners insurance, prepaid interest), minus your earnest money already on deposit and any seller credits.

It is normal for this number to surprise buyers who budgeted only the down payment. To put an illustrative figure on it, a sample $400,000 purchase carrying closing costs and prepaid items at 2 to 3.5 percent of the price would add $8,000 to $14,000 on top of the down payment. Your own figure depends on your tax rate, your insurance premium and the day of the month you close.

Where the estimate comes from

Your Loan Estimate shows a projected cash to close within three business days of applying. The final number arrives on your Closing Disclosure at least three business days before signing. Compare the two line by line - lender fees should match, and third-party fees should be close.

Getting the funds there

Closing funds must be wired or in certified form - personal checks do not work for large amounts. Schedule the wire the day before closing if possible.

Wire fraud is real: always confirm wiring instructions by phone with a number you found independently, never one from an email, even one that looks like it came from your title company.

Ways to reduce cash to close

Seller credits negotiated in the contract, lender credits in exchange for a slightly higher rate, gift funds from family, and down payment assistance programs can each reduce what you bring. Closing late in the month also reduces prepaid interest, because you prepay interest only from the closing date to the end of that month. Ask for each of these priced as a separate scenario before you lock.