~3 minute lesson · Beginner · Buying a Home
Down payment, closing costs, and cash to close
The Short Answer
Keep the purchase contribution, transaction costs, and remaining savings separate.
How It Works
The down payment is your purchase contribution
The down payment is the part of the purchase price you pay without the first mortgage, subject to any other financing. A larger contribution usually reduces the amount borrowed, but also leaves less cash available. Required minimums depend on the loan and your eligibility; 20% is not universal.
Closing costs buy different things
Loan fees, title and escrow services, recording charges, prepaid interest, and initial tax or insurance deposits can all appear at closing. Some are fees; others pay future expenses in advance. Request a written estimate tied to the property and loan instead of assuming one percentage covers everything.
Cash to close is the remaining amount due
The estimate combines the down payment, closing costs, credits, deposit already paid, and other adjustments. For illustration, $50,000 down plus $12,000 costs minus a $10,000 deposit equals $52,000 still needed, before other adjustments. Keep moving costs and your reserve outside this calculation.
California Example
A buyer may have enough for the down payment but still need money for closing costs and reserves after moving in. Ask for a written estimate of total cash to close.
What to Remember
- The down payment is your purchase contribution
- Closing costs buy different things
- Cash to close is the remaining amount due
Check the cash-to-close calculation and separately protect your after-closing reserve.