How Much Cash Do I Really Need at Closing?

How Much Cash Do I Really Need at Closing?

One of the biggest mistakes buyers make is thinking:

“I just need enough money for my down payment.”

Not necessarily.

Your down payment is only one part of the money you may need to bring to closing.

And because everyone’s situation is different, it’s important to understand the pieces rather than assume there’s one magic number.

Let’s Start With the Down Payment

Your down payment is the amount you’re putting toward the purchase price rather than borrowing through your mortgage.

The amount you need depends on your loan program, purchase price and individual circumstances.

Some buyers put down a relatively small percentage.

Others put down 20% or more.

There isn’t one down payment that is right for every buyer.

Your lender can explain the options available for your situation.

Then There Are Closing Costs

Closing costs are the various expenses associated with completing the purchase and mortgage transaction.

Depending on the transaction, these can include things such as:

  • Loan-related fees
  • Title-related fees
  • Recording fees
  • Attorney fees
  • Appraisal
  • Credit report fees
  • Prepaid taxes
  • Insurance
  • Escrow funding
  • Other transaction-specific expenses

Not every buyer will have the same costs.

You May Also Have Prepaid Expenses

Your lender may require certain expenses to be paid in advance or placed into an escrow account.

These can include things such as:

  • Property taxes
  • Homeowners insurance
  • Mortgage interest

The exact amounts depend on your closing date, loan requirements, property taxes and other circumstances.

Your Earnest Money May Be Applied

If you paid earnest money when you entered into the contract, that money may be credited toward the purchase at closing according to the terms of the transaction.

Your closing statement will show how the money is being accounted for.

Seller Credits May Reduce Certain Costs

In some transactions, the seller may agree to contribute toward certain allowable buyer costs.

But there are rules.

Your lender determines what is permitted under your loan program.

And seller contributions don’t necessarily cover every expense you have.

You May Need Money for Things Outside of Closing

This is where I want buyers to think beyond the closing table.

You’re moving into a house.

You may need money for:

  • Movers
  • Utility deposits
  • Locks
  • Cleaning
  • Paint
  • Furniture
  • Window coverings
  • Appliances
  • Immediate repairs
  • Tools
  • Lawn equipment
  • Other moving expenses

You don’t want to spend every dollar you have getting the keys and then realize you have nothing left for the first unexpected expense.

Keep Some Money in Reserve

Buying a home comes with responsibility.

Something will eventually need attention.

Maybe it’s a minor repair.

Maybe an appliance stops working.

Maybe you discover you need something you didn’t anticipate.

That’s why I don’t want you thinking:

“How little can I have left after closing?”

A better question is:

“How much do I need to comfortably buy this home and still have money left afterward?”

Your Lender Should Give You an Estimate

Your lender can provide estimates of your cash-to-close as your loan progresses.

Those numbers can change as the transaction moves forward.

That’s why you should review the updated figures they provide.

If something doesn’t make sense, ask.

Don’t Guess Your Cash-to-Close

This is important.

Don’t take the number you saw online.

Don’t assume it’s the same as your friend’s.

Don’t rely on a calculator you found on social media.

Your cash-to-close depends on your purchase, your loan, your property and your transaction.

Your lender is the person who can give you the specific figures for your situation.

A Simple Way to Think About It

Think of your available cash in three buckets:

1. Money Needed for the Purchase

Down payment and applicable closing expenses.

2. Money Needed for the Move

Moving, utilities, immediate household needs and other expenses.

3. Money You Don’t Touch

Your emergency or financial reserve.

That third bucket is easy to forget.

Don’t.

The Bottom Line

Buying a home isn’t just about having enough money to get to the closing table.

It’s about being financially prepared to own the home once you leave the closing table.

Know your numbers.

Ask your lender for current estimates.

Understand what’s included.

And make sure you’re not emptying your savings just to get the keys.

Note: Closing costs and cash-to-close requirements vary by loan, property, lender and transaction. This page is educational and is not financial advice. Your lender can provide the specific figures for your purchase.

Have a Question?

Buying a home comes with a lot of questions. You don’t have to figure everything out on your own.

Have a question about something you read here? Want to talk through your situation? Or just not sure what your next step should be?

I’m happy to help.

Schedule a Time to Talk With Karyn

No pressure. No obligation. Just straight answers.

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