Q&A: How Much Cash Do You Actually Need at Closing Beyond the Down Payment?

Buyers plan for the down payment for months, sometimes years. Then the lender sends a figure called cash to close, and it is larger than the number they saved for. This question comes up often enough that it deserves a plain answer.

Q: Is the down payment the only money I bring?

No. The down payment is one part. Closing costs and prepaid items sit on top of it. The figure that matters is cash to close, which adds those together and subtracts any credits and deposits you have already made.

Q: What are closing costs?

They are the fees for making the loan and transferring the property. Typical categories are lender fees, the appraisal, the credit report, title insurance, escrow or settlement fees, and recording fees. Which ones apply, and how much each one runs, depends on your loan, your lender, and the property.

Q: What are prepaids?

Prepaids are costs of owning the home that you pay in advance at closing. They usually include the first year of homeowners insurance, interest on the loan from the closing date to the end of that month, and an initial deposit into your escrow account for property taxes and insurance. These are not fees. They are your own bills, paid early.

Q: What comes off the total?

Your earnest money deposit is credited back to you at closing. So is any credit the seller agreed to in the contract, and any lender credit on your loan. Property taxes are also prorated between buyer and seller as of the closing date.

Q: Where do I find my real number?

In your loan paperwork. Your lender gives you a Loan Estimate after you apply, and it shows estimated cash to close. Before closing you receive a Closing Disclosure with the final figure. Compare the two line by line and ask about anything that changed.

Q: Is there anything outside that figure?

Yes. The home inspection is usually paid when it is done, well before closing. Moving costs, utility deposits, and a cushion for the first repairs are yours to plan for too. Lenders may also want to see reserves left in your account after closing. Ask yours what applies to your loan.

What trips people up is saving to the dollar for the down payment and nothing else. Ask a lender for a Loan Estimate early, before you fall for a house, so the full figure shapes your budget from the start.

This is general information, not legal or tax advice. Your lender is the right person for the numbers on your file.

Curious what your budget buys in the North Valley? Search homes here: https://www.previewarizonahomes.com/?utm_source=blog_pah&utm_medium=marketing&utm_campaign=daily

Jon Hegreness, REALTOR / Associate Broker, Howe Realty
(623) 826-0888 / JonHegreness@gmail.com / License BR540940000
9059 W Lake Pleasant Pkwy, B-200, Peoria, AZ 85382
previewarizonahomes.com