What does "Cash to close" mean?

Definition

Cash to close is the total amount of money you must pay on the day of closing. It includes your down payment and all closing costs.

Understanding Cash to Close

Cash to close comes into play near the end of the mortgage process. It's the total amount a buyer needs to bring to finalize the purchase. In simple terms, it's the sum of down payment, closing costs, and any other fees minus any credits or deposits. Example: If your down payment is $15,000 and closing costs are $5,000, but you've already paid $2,000, your cash to close would be $18,000. It's not just the down payment. Many people think cash to close is only the down payment, but it includes various costs to complete the deal.

People Want To Know

Is bringing cash to closing acceptable?

Bringing cash to closing is not acceptable. Most lenders require the cash to close to be transferred via wire transfer or certified funds, such as a cashier's check. This ensures the payment is secure and can be processed quickly on the closing day.

Why is cash to close higher than closing costs?

Cash to close is higher than closing costs because it includes both your down payment and all associated closing costs. For example, if your down payment is $20,000 and your closing costs are $5,000, your cash to close would be $25,000.

How likely is a cash offer to fall through?

Cash offers are less likely to fall through compared to financed offers, with a failure rate typically below 5%. Factors contributing to this lower risk include the buyer's financial stability, fewer contingencies, and the absence of financing requirements.

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More From The Mortgage Glossary

Cash-out refinance

A cash-out refinance is a way to borrow against your home's equity. You replace your current mortgage with a larger one and receive the difference in cash, all while keeping a single monthly payment.

Closing

Closing is the final stage of buying a home. It's when you sign the legal documents and transfer the funds to officially take ownership of the property.

Closing costs

Closing costs are the fees you pay to a lender to finalize your mortgage. These typically range from 3% to 6% of the loan amount and cover things like appraisal fees, title insurance, and other administrative expenses.