Understanding Cash to Close: A Guide for Idaho Homebuyers

Congratulations! You’re nearing the end of your home buying journey, with the Closing Disclosure (CD) from your lender in hand. This crucial document, received at least three days before the final closing, signifies that you’re almost ready to celebrate the big moment with keys to your new home. Among the details outlined in the CD, one figure stands out: the cash to close. But what exactly does this number represent, and how is it determined?

What is Cash to Close?

In essence, cash to close encompasses all the costs associated with finalizing your Idaho home purchase, spanning from the accepted offer to the closing table. These expenses, known as closing costs, can be covered by the buyer, seller, or shared between both parties, as agreed upon in the purchase offer. The typical components of closing costs include:

1. Appraisal: Often borne by the buyer, this fee ensures the property’s value aligns with the purchase price.
2. Attorney Fees: Covering document preparation and title searches, these fees ensure a smooth transfer of ownership.
3. Title Insurance: Safeguarding against third-party ownership claims, this insurance is essential for protecting your investment.
4. Application Fees: Paid to the lender for processing your mortgage application.
5. Origination Fees: Covering the lender’s underwriting costs.
6. Mortgage Insurance Premiums: If applicable, these premiums provide additional protection for the lender.
7. Funding Fees: For specific loans like FHA, USDA, and VA loans.
8. Pest Inspection Fees: Ensuring the property is free from infestations.

These expenses, itemized in the Closing Disclosure, are added up to determine the total cash to close. However, it’s worth noting that some lenders may offer to roll certain fees into the loan value, reducing the immediate cash required at closing.

Sources of Funds

Before reaching the closing table, you’ve likely already paid an earnest money deposit (EMD), typically around $1,000, held in escrow until closing. This deposit is applied toward your closing costs.

The bulk of the cash to close stems from the down payment. Depending on your loan type, you may need to bring anywhere from 0% to 20% or more of the purchase price to closing. It’s crucial to discuss these details with your lender well in advance to ensure a smooth underwriting process.

Methods of Payment

While physical cash isn’t expected at closing, you have several options for covering your closing costs:

1. Cashier’s Check: Obtainable from your bank or credit union, this is the most common method. Ensure you have the exact amount and payee details.
2. Certified Check: Another option available from your bank.
3. Wire Transfer: While accepted, allow ample time for processing and verify details with your lender to prevent fraud.

Note: Cash, credit/debit cards, and personal checks are generally not accepted due to the need for transparent sourcing of funds.

Understanding cash to close is pivotal in navigating the final stages of your home buying journey. By familiarizing yourself with these concepts and discussing them with your lender, you’ll be well-prepared for a seamless closing process.