What is Cash to Close?
Cash to close is the total amount of money a buyer must bring to the closing table to complete a real estate purchase. It includes the down payment, closing costs, prepaid items (taxes, insurance, interest), and any adjustments for credits or deposits already made. The exact amount is detailed on the Closing Disclosure form provided at least three business days before closing (for financed transactions).
Components
Down payment: Purchase price minus loan amount. For a $200,000 property with 80% LTV, the down payment is $40,000.
Closing costs: Loan origination fees, title insurance, appraisal, survey, recording fees, attorney fees. Typically 2-5% of the purchase price.
Prepaid items: Property tax escrow (2-6 months), homeowner's insurance (first year's premium), prepaid interest (from closing to end of month), HOA dues.
Credits: Subtract earnest money deposit (already paid), seller credits or concessions, and any lender credits.
Cash to close for investors
Investment property purchases typically require more cash to close than primary residence purchases because of higher down payment requirements (20-25% vs 3-5%) and the inability to use many first-time buyer assistance programs. A $200,000 investment property might require $48,000-$55,000 cash to close versus $12,000-$18,000 for a primary residence.
For wholesalers
When marketing to financed buyers, help them understand their total cash-to-close requirement. If your deal is priced at $150,000 and the buyer needs a 25% down payment plus 3% closing costs, their cash-to-close is approximately $42,000. Knowing this helps you target buyers with adequate capital.