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A home can be one of the most exciting purchases — and also one of the most complicated.
It may already feel like a demanding task to focus on all the required details of buying a home, like square footage, school district, inspections, and appraisals. It’s therefore common for buyers to encounter confusion about what to expect on closing day.
Closing day comes with several requirements. Of them, a phrase known as “cash to close” is the one with most potential to blindsight buyers. Cash to close means the amount of money you must bring with you on the closing day.
But it’s not just your down payment or the final closing costs; cash to close includes every potential day-of cost, including credits and points. Keep reading to learn what cash to close is, how it differs from closing costs, and what form of payment you can use.
Closing Cost vs. Cash to Close: What’s the Difference?
Closing costs and cash to close are two common phrases to describe the amount you need to bring with you to the closing table. Before you buy a home, it’s important to understand the difference between the two.
“The difference between cash to close and closing costs are that closing costs are the fees that are required in order to get the loan (or perform the closing if the buyer is paying cash), and cash to close encompasses your down payment as well,” said Katie Messenger, a Kentucky-based Realtor with Keller Williams.
What Are Closing Costs?
Closing costs are the fees and administrative costs associated with buying a home and taking out a mortgage. Most closing costs are required as a part of taking out a home loan.
“If someone is paying cash, the bulk of those go away, and they basically are paying for the attorney to prepare docs and have the deed recorded, as well as the owner’s title policy,” Messenger said.
Common closing costs include:
- Appraisal fees: An appraisal is a third-party estimate of the value of the home. Most lenders require an appraisal to ensure the home’s value is worth what the loan amount is based on.
- Attorney fees: Depending on where you live, an attorney may be required to complete the title transfer. If this is the case …….