Cash to Close vs. Down Payment: What Is the Difference?

Down payment, closing costs and prepaids: three different buckets

The first bucket is the part of the purchase price you pay yourself. The second is the cost of the transaction, such as lender and settlement charges. The third includes items paid ahead or collected for future bills, such as insurance and escrow. Those buckets serve different purposes even when they are due at the same closing.

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A hypothetical cash to close example

Assume a $25,000 down payment and $12,000 of closing costs, prepaid items and initial escrow. Subtract a $5,000 deposit already paid and $3,000 of permitted credits. The remaining amount in this simplified example is $29,000. Actual adjustments and credit limits depend on the transaction.

How earnest money changes your cash to close

Earnest money already credited to the transaction generally reduces the remaining amount you bring. It still came from your savings earlier. When checking cash left after closing, account for money paid before closing too. Avoid subtracting the same deposit twice.

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Ask why the estimate changed

Request a comparison between the latest Loan Estimate and Closing Disclosure. Ask whether a change came from a fee, insurance premium, tax estimate, closing date or credit. Third party charges are not automatically identical between lenders or transactions.

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Protect the transfer

Confirm payment instructions directly with your closing professional using a phone number you already trust. Treat a last minute email changing wire instructions as something to verify independently. Keep account numbers and documents out of this website’s public question tools.