What Does Cash to Close Mean? | Better Mortgage (2024)

FAQs

What Does Cash to Close Mean? | Better Mortgage? ›

“Cash to close'' is the total amount of money you'll owe on closing day. Keep in mind that this is different from your closing costs, which are just the fees paid to your lender when closing on your loan.

Your cash-to-close amount is usually higher than your total closing costs because it includes your down payment.

Cash to close is the total amount needed to bring to the closing attorney's office on closing day. It typically includes down payment, fees, pre-paid taxes, homeowner's insurance, and any homeowners association fees that may be applicable.

Cash to close 'To borrower' vs 'from borrower'

Cash to close “To borrower” is money back to you, not money you owe. With a refinance, “cash to close from borrower” may show as a negative number or “cash to close To borrower”. In both cases, extra proceeds are paid to you at closing.

Once you receive the final closing disclosure, the cash to close amount generally should not change. However, in certain cases, such as certain additional closing costs or credits, errors in disclosed information, there may be exceptions.

What does it mean if cash to close is negative? If a cash to close is negative it means your lender credits are higher than your loan costs—and you're actually going to leave the closing with money due to you. Don't forget, however, that you're paying for this with a higher interest rate.

Cash to close does not include the total mortgage loan amount or purchase price. It is the buyer's out-of-pocket contribution only. The cash to close amount is listed and calculated separately from any earnest money deposit already submitted.

The closing cost you put on your credit card may not exceed 2% of the loan amount. For example, if your loan amount is $350,000, you could charge up to $7,000. You must have enough money in your bank account to cover the charges.

You can, however it is not typically advised. Be aware that changing your down payment amount can result in delays in the process. Your loan will likely need to be rewritten to accommodate for the change – and, if the amount is less than initially planned, you could be at risk of losing your loan approval.

Your Estimated Cash to Close includes your down payment and closing costs, minus any deposit you have already paid to the seller, any amount the seller has agreed to pay toward your closing costs (seller credits), and other adjustments.

For what reason do lenders season the borrower's cash to close? ›

For what reason do lenders 'season' the borrower's cash to close? Requiring cash be seasoned for 60 days gives the credit reporting bureaus enough time to begin reporting any new debt. The new debt might change the DTI and might add a new payment or make the cash ineligible for use as the down payment.

If you don't have the money to cover closing costs, you could get a no-closing-cost mortgage. This type of home loan doesn't eliminate closing costs. Instead, it rolls your closing costs into the loan principal, so you repay it over time with interest.

The exact amount you need, for both closing costs and your down payment, will be outlined in your Closing Disclosure, which is a document that you will receive at least three days before your closing.

One of the most expensive costs in your cash to close total will be the down payment. A down payment is a percentage of the purchase price that you pay upfront, lowering the amount you have to borrow and instantly contributing to the equity in your home.

Your lender is required by law to give you the standardized Closing Disclosure at least 3 business days before closing. This is what is known as the Closing Disclosure 3-day rule. This requirement is thanks to the TILA-RESPA Integrated Disclosures guidelines, which went into effect on October 3, 2015.

A homebuyer who makes a cash offer intends to pay in full, with no mortgage or other type of financing. Cash deals are more appealing to sellers than financed deals, because they close faster and are less risky. Many cash buyers are home flippers or investors.

Do Closing Costs Include a Down Payment? No, your closings costs won't include a down payment. But some lenders will combine all of the funds required at closing and call it “cash due at closing” which bundles closing costs and the down payment amount — not including the earnest money.