Cash to close does include down payment and closing costs. These expenses can add up, and you should talk to your mortgage representative and real estate agent if you worry that it may be too much. There are ways to alleviate the immediate out of pocket expense. 

  • Cash to close includes closing costs and down payment 
  • You can negotiate the items in cash to close 
  • FHA loans have some different items for cash to close than traditional mortgages 

While your earnest money deposit (EMD) helps offset this expense, you may feel like this is too much. If you feel like the down payment is too much cash to produce before closing, you should talk to your mortgage representative about rolling a portion or all of it into the mortgage. You can also talk to the seller about a seller’s concession. 

What Does Cash to Close Payment Include? 

Cash to close include does include down payment and a few other important items. One major component is the down payment, but it also includes closing costs. Rocket Mortgage says that cash to close includes total closing costs minus any fees that you roll into your mortgage. Closing costs include

  • Appraisal fees 
  • Attorney fees 
  • Title insurance 
  • Mortgage application fees 
  • Origination fees (for loan underwriting) 

These costs may include other things, such as private mortgage insurance (PMI) if required. If you have questions about what is included in your area or for your specific transaction, you should contact the attorney or title company you work with. 

Down Payment 

What is the difference between down payment and cash to close? Down payment is a significant component of cash to close, but it is not the only piece of the puzzle. Closing costs include the fees we outlined earlier, and it include other payments as well. However, the down payment, which is usually 20% of the purchase price makes up the bulk of what you need for cash to close. 

Earnest Money 

 What is the difference between earnest money and cash to close? The EMD is held in reserve and put against your cash to close, either the closing costs or the down payment. It reduces you cash to close. 

Can You Negotiate What Will Cash to Close Payment Include? 

You can negotiate items included in cash to close. In fact, you should try to find the best terms you can and negotiate with your lender and other professionals. Rocket Mortgage lists some common fees that home buyers negotiate: 

  • Homeowner’s insurance 
  • Discount points 
  • Origination fees 
  • Underwriting fees 
  • Loan application fees 
  • Real estate commissions 
  • Title insurance 

Buyers commonly negotiate all of these. Some things that you are non-negotiable include appraisal fees, credit check fees, courier fees, and taxes. While you can negotiate fees with your lender or title company, you can also ask the seller to help pay for the closing costs. We call these seller concessions, and in a hot housing market you may not get the seller to do this. 

What if Cash to Close is Negative? 

You may ask, with all the closing costs and the down payment how can cash to close be negative? It can if you got a loan to cover these fees. Often, the bank estimates the costs and approves you for a loan to cover everything. 

The Finances Hub says that banks usually adjust the numbers to the exact figure you need, but sometimes they do not. If they do not, then you have a negative cash to close value. This value gets tied up in your home, and you will not get it back until you sell or refinance your house. 

Cash to Close Calculator 

It is important to have a good estimate of what your cash to close will be. The down payment is a set amount, so that is straightforward. However, closing costs may vary wildly, especially if you negotiated them well. This is where a good calculator comes in handy. Here are a couple: 

If you go to your lender, he should give you a good estimate as well. In fact, many mortgage companies have calculators right on their websites. 

What Does FHA Cash to Close Payment Include? 

Cash to close for Federal Housing Authority (FHA) loans includes the standard items that we listed above. However, according to FHA News and Views there are some elements you should pay special attention to: 

  • Down payment is 3.5% – 10% depending on your credit score 
  • Sellers may only contribute up to 6% of the purchase price, so this limits concessions 
  • Your lender may require a separate escrow account for fees and taxes, they may charge an escrow fee 
  • These loans require an upfront mortgage insurance premium 

FHA loans do work similarly to conventional loans, but they are more rigid in some respects. The differences may be significant, so ask you mortgage representative all the details before you decide which loan is best for you. 

Final Thoughts 

If you are buying a house that down payment can seem huge. For a conventional mortgage, the standard amount is 20%. On a $200,000 house that is $40,000. While this is a big sum of money to pay at once, your earnest money will help offset this some. You must remember that this is probably the largest single purchase you will make in your life, and you need to save a lot of money first.

You should save extensively before you look for a house and have the 20% in the bank before you start looking. However, most people do not look at the home buying process until they want to buy a home. If you find yourself in the situation where you have the income and desire to buy a house but lack the cash for the down payment, there are ways around that huge cash to close figure. You must be honest with your mortgage representative, real estate agent, and the seller. It may surprise you how they can help bring down that enormous number.