What cash to close means
and why it is not the down payment
Cash to close is the whole number a buyer brings to settlement. Costs and prepaid items raise it, the deposit already paid and any credit lower it, and the lender puts the final figure in writing before the closing date.
- Cash to close is the total a buyer brings to settlement: the down payment, plus closing costs, plus prepaid items such as the first months of taxes and insurance
- The deposit already paid under the contract comes off it, and so does a seller credit or a lender credit, so the figure is not the down payment and the costs simply added together
- It is the number on the lender's Closing Disclosure, which arrives at least three business days before closing, and it usually runs higher than the down payment alone
Explainer. Written by The JK Realty Group.
Cash to close is the total amount of money a buyer has to bring to settlement. It starts with the down payment, adds the closing costs, and adds the prepaid items, which are things like the first months of property taxes and homeowners insurance collected ahead so the escrow account opens with a balance in it. That is the part most buyers expect. The part that surprises people is that the number then comes back down, because money you have already put in is credited to you.
The deposit is the biggest of those credits. When a contract is signed in New Jersey, the buyer pays a deposit that is held in escrow, and at settlement it is applied to what you owe. You are not paying it twice. A seller credit works the same way in the arithmetic: if the seller has agreed to put money toward your costs, that reduces what you have to wire. A lender credit does the same job, money the lender puts toward your costs in exchange for a higher interest rate, and worth raising when cash rather than monthly payment is the thing that is tight.
Depending on how the deal is written, a buyer's cash to close may also carry the buyer agent's compensation, when the seller is not covering it. That is a line on the statement like any other. In New Jersey commissions are negotiable.
The figure becomes official in one document. The lender sends a Closing Disclosure, a five page statement of the final loan terms and the cash to close, at least three business days before the closing date. That gap exists so you can read it, and the number on it is the one the settlement agent will expect. Ask your lender for cash to close, in those words, early in the process. A lender who is only quoting you a down payment percentage is answering a smaller question than the one you need answered.
What to ask, and who answers it. Your lender is the one who can tell you what your own cash to close will be, what the escrow will be set at, and what could still move between the first estimate and the disclosure. A licensed New Jersey attorney is who reads your contract and tells you how your deposit and any credit are handled in your own deal. Your agent can tell you what tends to be reasonable to ask a seller for in a given market. Nothing on this page is a quote for a specific transaction.
Our take
The two halves pull opposite ways: costs and prepaids push the number up, your deposit and any credit bring it down. If you are budgeting in South Jersey, ask your lender for cash to close, not just the down payment.
Have a question about the process? Let's talk.
General information on how the process runs. What your own cash to close will be is a question for your lender, and how your deposit and any credit are handled is a question for a licensed New Jersey attorney. General information, not advice about any specific property. The JK Realty Group, brokered with OMNI Real Estate Professionals. Equal Housing Opportunity. See our Terms of Use for how we source and credit these posts.
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