03 Mar Therefore, average costs to close would likely range from 9% to 12% of the loan amount
- Closing costs: Cash to close includes all of the money you'll need to bring with you on the closing day, including your closing costs.
- Down payment: Your down payment is the percentage of the purchase price that you'll be paying upfront. The down payment usually represents the largest portion of the cash to close. In most cases, it can be as low as 3%, with some people putting down up to 20%. Certain government loans like VA and USDA loans don't require a down payment at all.
- Mortgage points: Points are fees paid to the lender to “buy down” the interest rate on a mortgage. One point generally lowers your interest rate by 0.25% and costs 1% of the price of the home. The cost of any mortgage points is also included in your cash to close.
- Credits: Lender credits are similar to mortgage points, but work the opposite way. Lender credits allow you to reduce your closing costs in exchange for a higher interest rate. If you receive lender credits, they'll be reduced from your total cash to close.
- Earnest money: When you make an offer on a home, your real estate agent may encourage you to offer earnest money as a way to show the seller you're serious. The earnest money is paid upfront and usually goes into an escrow account until the closing. If you've paid payday cash loans Edon earnest money, it will be subtracted from what you owe on the closing day.
How Cash to Close is Calculated
“Cash to close is calculated by adding the amount the buyer is putting down plus the total of all the fees mentioned above (minus any lender or seller credits),” Messenger said. “For easy math, if a buyer is purchasing a home for $250,000, putting $25,000 down, and closing costs are $5,000, then their cash to close is $30,000.”
You can find your cash to close in your Closing Disclosure, which is a five-page form that provides all details of your mortgage loan.
Pro Tip
Before your home closing, be sure to read through your Closing Disclosure to make sure you fully understand how much you'll have to bring with you on the closing day.