The first-time buyer's guide to cash to close

Most first-time buyers save for a down payment and then feel blindsided by the "cash to close" line on their Loan Estimate. It is usually higher than the down payment alone, and it arrives with a list of unfamiliar terms. The good news is that every item is predictable, and several can be reduced or covered by someone else.

What makes up cash to close

Cash to close is the amount you wire or bring to the title company on closing day. It includes:

Down payment. 3% to 3.5% for many first-time buyer programs.
Lender fees. Origination, processing and underwriting. Ours is a flat sample fee of $995.
Third-party fees. Appraisal, credit report, title insurance, settlement and recording fees.
Prepaids. Your first year of homeowners insurance and daily interest from closing to month end.
Escrow deposits. A cushion of a few months of property tax and insurance.

Minus any credits: earnest money you already paid, seller credits, lender credits and assistance funds.

A realistic example

Here is a sample cash to close for a $415,000 townhome in Lehi with a 3% down conventional loan.

Down payment: $12,450
Lender fee: $995
Appraisal and credit report: $710
Title, settlement and recording: $2,340
Prepaid insurance and interest: $1,690
Initial escrow deposit: $1,050
Earnest money already paid: minus $4,000
Estimated cash to close: $15,235

Closing costs and prepaids add about $6,800 on top of the down payment in this example.

Five legitimate ways to bring less

1. Ask for seller concessions

Conventional loans with less than 10% down allow seller contributions up to 3% of the price, FHA up to 6% and VA up to 4% plus certain costs. In a balanced market, sellers often agree, especially on homes that have been listed for a few weeks.

2. Use down payment assistance

Utah Housing Corporation offers assistance programs for eligible buyers, often as a second loan that is repaid when you sell or refinance. Some cities and employers have their own grants.

3. Take a lender credit

Choosing a slightly higher rate can generate a credit toward closing costs. It raises your payment a little, so it works best if you expect to refinance or move within several years.

4. Accept a family gift

Gifts from relatives can cover down payment and closing costs on a primary home. You will need a signed gift letter and a paper trail showing the transfer.

5. Time your closing date

Closing late in the month reduces prepaid interest. It is a small saving, usually a few hundred dollars, but it is easy.

Avoid these last-minute mistakes

Do not open new credit cards or finance furniture before closing.
Do not move large sums between accounts without telling your loan officer.
Verify wiring instructions by calling the title company at a number you found yourself. Wire fraud targets homebuyers.

Know your number early

The best time to learn your cash to close is before you make an offer, so your agent can negotiate the right credits. Our loan officers send an itemized estimate with every pre-approval. Start with a free pre-qualification, or see how programs compare on our first-time buyer page.

Figures are samples for illustration only. Actual costs vary by property, loan program and title provider.