When you buy a home, do you know what costs and cash you’ll need to pay at closing? If you aren’t sure what “cash to close” means, what your closing cost amounts are or how to pay them, read on to learn more.
For people who are buying their first home, there are a lot of terms and numbers that can be hard to understand. As the day of closing draws near, you may hear the phrase “total you get at closing.” For the closing on the sale of your new home, this is the total amount of money you will need to bring. This article will explain exactly what this amount means and what it covers, so you will be ready financially on the day of the closing.
The Total at Closing Explained
The total you get at closing is the full amount of cash you need to provide at closing to buy your new home. This total will include your down payment, closing costs, and any other fees and adjustments associated with finalizing the real estate transaction.
Your down payment is typically the largest component of the total amount due at closing. This is the upfront payment you make as a percentage of the purchase price to secure the mortgage loan Common down payments are 10%, 15%, or 20% of the total home purchase price
Closing costs make up the next big chunk of your closing total. These are the fees charged by the lender and third parties to process, document, and finalize the real estate transaction. Closing costs can run anywhere from 2% to 5% of the total loan amount. They include charges such as:
- Origination fees
- Appraisal fees
- Credit report fees
- Title insurance fees
- Recording fees
- Transfer taxes
- Prepaids for home insurance, mortgage insurance, property taxes
- Attorney fees
You will have to pay the full amount at closing, plus any fees or changes that come up during the final walkthrough and settlement. Let’s say the seller agreed to give you a credit for some repairs or concessions. This will show up as a credit that lowers the total amount you owe.
Where to Find Your Closing Total
Two important documents will show you how much money you will likely need for the closing.
Loan Estimate: This is provided to you within 3 days of applying for a mortgage. It will include estimated totals for the down payment and closing costs.
Closing Disclosure: This is the final detailed breakdown of your closing figures. You receive it at least 3 days before the actual closing date. It will show the final total amount you owe for down payment, closing costs, and any other adjustments.
Bringing Certified Funds to Closing
As soon as you know the final amount, you need to get certified funds ready and hand them over. Like bank checks, cashier’s checks, or wire transfers, certified funds are guaranteed ways to pay. You can’t just bring cash or a personal check. Most likely, you’ll need to give the title company the certified check or wire transfer at least one or two days before the closing. This makes sure that they have the cash on hand and are ready to pay for the deal.
Closing Total is the Final Step to Homeownership
Understanding the total cash you need to bring for closing makes the home buying process smoother. There are no surprises about how much money you will owe and when it is due. You can budget properly and have your certified funds ready. Once you hand over that last payment, you can celebrate getting the keys to your new home!
Where can you find the amount owed at closing?
You can determine how much you need to pay for each of your closing costs by looking at your Closing Disclosure. You should review it closely to make sure your lender credited you for any prepayments.
Your Closing Disclosure itemizes your closing costs, telling you exactly how much you owe for each fee or charge. Your cash-to-close amount is usually higher than your total closing costs because it includes your down payment.
Before you sign your mortgage, compare your Closing Disclosure with your loan estimate. The charges, interest rate and loan terms on your Closing Disclosure should be very similar to your loan estimate. If anything has changed from your loan estimate to your Closing Disclosure, you should discuss this with your mortgage lender.
Cash to close FAQs
Below, we answer a few additional questions you may have about the cash-to-close process.
Closing Costs Explained Visually
FAQ
What does total due at closing mean?
“Total due at close” includes both the down payment and the closing costs. It is the last amount of money a buyer needs to pay to complete a real estate deal.
Do you get your money at closing?
Key Takeaways: The seller typically gets paid a few days after closing by wire transfer or cashier’s check. The remaining balance on your mortgage and closing costs will be deducted from the purchase price and paid out by the escrow agent.
How much money should you have in the bank at closing?
You should normally give a 5% deposit, which is 5% of the purchase price minus the $1,000 you already gave. This money is held just like the initial offer deposit and refunded to you also at closing.
What happens if the buyer doesn’t have enough money at closing?
If you can’t come up with the cash to close, you may need to buy time to collect the funds by negotiating a later closing date. Otherwise, you could lose your earnest money, and the deal could fall through.