Skip to main content

CASH to CLOSE: Funds Needed at Closing


CASH to CLOSE:
Funds Needed at Closing

"Cash to Close" ...

It's the term used in mortgage lending that refers to the final
amount of money a Borrower needs to bring or send to their Closing on their Closing day.  

 Contact Me for Info Today!But in today's modern mortgage process, "Cash to Close" actually means anything but cash when it comes time for you to produce funds at the time of your Closing.

Why?

Today's rule of thumb regarding mortgage closing fund requirements is:  (Rules and practices vary from State to State, so for simplification, I refer to Illinois practices here.
  • Amounts under $50,000 are typically brought to Closing via a Cashier's Check
  • Amounts of $50,000 and over are sent by wire from the Borrower's Bank to the Title Company's Bank

So HOW does your Mortgage Lender calculate the actual amount of your "Cash to Close" - Closing Funds? 

I've broken down the calculation I use for my typical Borrower:  (Understand that your personal buying and financial scenario may vary from the below.)

Total Down Payment
- Minus: Any Earnest Money paid
Plus:  All Closing Costs
- Minus:  Any Credits due to the Buyer/Borrower
from the Seller, Mortgage Lender, or 
other allowed Credits at Closing
Equals = Closing Funds Needed

When breaking down the "Cash to Close" equation:  The simplest portion to understand and calculate is the first one mentioned ... the Down Payment.  Commonly seen down payments are 3%, 3.5%, 5%, 10% or 20%.

Questions regarding Down Payment ... and the benefits of each increment above ... are often the first questions I hear from my mortgage clients.  In reality, the answer to the most commonly heard question ... "What's the "best" down payment?" ... is directly linked to the individual Borrower and best determined after a thorough discussion with your LO.  

(To help in that regard, here are 4 of my posts that help explain typical Down Payments, Down Payment Requirements, and mortgage options tied to them.)

But a Down Payment is typically not the ONLY cash you'll need to Close.  Closing Costs are often required as well.

I find for my mortgage clients, that Closing Costs are the most misunderstood part of the "Cash to Close" equation.  Many of my Borrowers don't know, prior to entering the mortgage process, that there are fixed costs associated with a mortgage ... costs that are to be paid by them, the Borrower.

These Closing Costs can include:
  • Credit Report(s)
  • Attorney Fees (when utilized)
  • Appraisal Fee
  • Lender's Origination Fees
  • Title Insurance Fee
  • Title Settlement Fees
  • Homeowners Insurance
  • Tax Escrow (set-aside at Closing)
  • HOA Dues (if applicable)
  • Flood Certifications (where applicable)
  • More, depending on the individual Borrower/Property

Borrowers need to know:  Closing Costs can add up to thousands of dollars, depending on the individual transaction and the state/locale in which the transaction is taking place.  

Why does the location make a difference?

Certain locales (cites/towns, etc.) charge Buyers Real Estate Transfer Tax Fees.  Some Sellers can insist on not paying those fees/costs.  That is often negotiated and then reflected in the Sales Contract.

It's important to note:  These types of Closing Costs are not financeable on most all Conventional Loans ... and most all FHA and VA Loans, as well.  That said, FHA and VA do allow certain "upfront" Mortgage Insurance and Funding Fees to be financed (added to the loan amount).   

Closing Cost Credits:  Who doesn't love 'em ... especially when paid by someone else?  Closing Cost Credits can even be "Lender Paid".  But be aware, these credits do come with a cost.  

What are the costs most often associated with receiving Closing Costs Credits? 

Sellers typically raise their Sales Price.  Mortgage Lenders typically raise the Interest Rate being charged the Borrower(s).  FHA and VA allow their "upfront fees" to be "rolled -in ", or simply added to the Base Loan Amount (and charge Interest on that additional amount, as well).  

There are two (2) very important things to know regarding the "Cash to Close"/funds needed for your Closing:

     1.  Know HOW your "Cash to Close" is calculated by your Lender.  

   Remember:  The final dollar amount you'll need at Closing will include any monies needed for costs associated with buying your house and taking out a Mortgage Loan  ...  ADDED to any Down Payment amount being made.

     2.  Don't proceed until you thoroughly understand how the final dollar amount and "Cash to Close" was calculated.  

     As you can see, there are many "moving parts" and things for Lenders to know and understand throughout your entire mortgage process.  It pays to work with an experienced and knowledgeable mortgage originator, especially when you're waiting to hear about Cash to Close, the funds needed at Closing.  In New Lenox and the greater Chicagoland area, contact me ...



    
     * Hoping to Buy or Refinance a Home in New Lenox or elsewhere in the Chicagoland area? Contact me! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed

American Portfolio Mortgage Corp.
nmls #175656


Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
 Get a Quote!
 

  Twitter Account of Gene Mundt, Mortgage Lender   LinkedIn Account of Gene Mundt, Mortgage Lender   Facebook Acct. of Gene Mundt, Mortgage Lender   Pinterest Acct. of Gene Mundt, Mortgage Lender   
       Gene's Chicagoland Blog/Gene Mundt, Mortgage Lender 

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: 
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago 
and the greater Chicagoland region, including: 
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, 
Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, 
Romeoville, Naperville, etc.), DuPage County, the City of Chicago, 
Cook County, and elsewhere within IL & WI.

Referrals are Welcomed!

     

  

        






Comments

Popular posts from this blog

Property Addresses: Gettin' Down to the Nitty Gritty

Property Addresses:   Gettin' Down to the Nitty Gritty

Take just a second and read through the following statements ...


“The devil is in the details” 
... "in life, it is often the tiny details that end up 
being the most important"

"Get Down To The Nitty Gritty"

“Little details have special talents in 
creating big problems!” 

“Sweat the details”

"Success is the sum of details"

Details ...Details ... it's all about the details ...
     And I'll admit it, I'm a bit of a nerd about them.  My whole family is.  Details, the intricacies, the little things ... they matter to us.
When I was growing up, a typical conversation (and argument) between my brothers and myself at the dinner table or in the backyard centered around "details".  It didn't matter what the topic was, it was the minor differences ... the details about the topic ... that we argued about.  I'm sure we drove our parents crazy.  
Sports statistics and games ... minutiae rega…

Ready for Fall? It's Arriving Soon

Ready for Fall?  It's Arriving Soon

Friend ...

Maybe it's because football season has started. Maybe it's the kids being back in school. Or because the night air is cooler. But a sense of Fall has arrived here in Chicagoland ...

The Fall Season brings changes with it. Changes in temperatures. Changes to the clothing we wear. Our focus seems to shift with the coming of shorter days, falling leaves, and crisp air.

Fall can be the perfect time to do a multitude of things. You can prep your home for the upcoming winter weather ... or for Fall listing and sale. 

But whether you're moving on or staying put, Fall is a great time to declutter and organize your home inside and out ... and your finances too.

I've googled like crazy to find interesting articles filled with Fall info, ideas, tips, and photos. Articles that will help you usher the Fall Season in at your house. I hope you enjoy reading the articles offered below and that they inspire you to make any needed changes.

Rem…

Paper or Paperless billing? Which serves YOUR needs best?

Paper or Paperless billing?  Which serves YOUR needs best?


These days, companies are under pressure to go "green" and become more environmentally friendly.  As a result, an increasing number of businesses are offering their customers a paperless option with which to receive and pay their bills. 

There are obviously many positives to be found within these paperless services:


Trees are saved  Reduced postage costs  Less paper documentation to organize or save/storePossible rewards for switching to paperlessPayments can often be made/posted same-dayAutomated payments can be set-upMore
But I can tell you from my vantage point as a Chicagoland/IL/WI Mortgage Originator, there are also negatives to be found within paperless methods.  For some of my mortgage clients, the choice of going "paperless" just hasn't worked well.

 For some, an email or text reminder regarding payment of bills has not been enough. They NEED a paper billing to arrive in their mail. 

Their paper bil…