Understanding Your Closing Disclosure

If you have received your Closing Disclosure (CD) from your lender, you are almost finished with your home purchase. The lender provides this document at least three full days before closing. It shows all the final numbers and lets you prepare to sign the purchase documents and get your keys. One key figure on the CD is the cash to close. Let’s break down what that means.

What Are Closing Costs?

Closing costs include the legal fees, appraisals, and other charges needed to complete your home purchase. Buyers, sellers, or both can pay these costs, depending on the purchase agreement. Common closing costs include:

• Appraisal fees, usually paid by the buyer

• Attorney fees for preparing documents and conducting a title search

• Title insurance to protect against third-party claims

• Lender application fees

• Loan origination fees for underwriting

• Mortgage insurance premiums, if required

• Funding fees for FHA, USDA, or VA loans, if required

• Pest inspection fees

When you add all these fees together, the total can be significant. The Closing Disclosure lists each fee separately and calculates the overall cash to close. Your lender may allow some fees to roll into your loan amount, depending on the type of fee and lender policies.

Earnest Money Deposit (EMD)

You likely paid an earnest money deposit when you agreed to buy the home. This deposit, often around $1,000, is held in escrow until closing. At closing, the lender applies the EMD toward your total closing costs.

Down Payment

Most of your cash to close comes from your down payment. Depending on your loan type, you may need to bring anywhere from $0 up to 20% (or more) of the purchase price. Discuss the exact amount with your lender ahead of time so you are fully prepared.

Methods to Pay Closing Costs

Lenders do not require buyers to bring physical cash. Instead, they offer several safe options:

• Cashier’s check: Most common. Get it from your bank or credit union with the exact amount and payee name.

• Certified check: Another option through your bank.

• Wire transfer: Accepted but requires verification and a few days for processing. Always confirm the recipient with your lender to prevent fraud.

Note: Lenders typically do not accept cash, personal checks, or credit/debit cards for closings. They want to ensure the funds are secure and not borrowed for the transaction.