Cash to Close in San Diego

1. Earnest money, right after acceptance

The first check you write is the earnest money deposit. The Consumer Financial Protection Bureau defines it as a deposit a buyer pays to show good faith on a signed purchase contract. A seller or a third party, such as a real estate agent or title company, holds it. If the sale closes, it can be applied to the down payment or closing costs. If the contract ends for a reason it permits, you get it back; if you do not perform in good faith, the seller may keep it.

The amount is negotiated in the purchase contract, and no statute sets it. What California law does limit is how much of it a seller can keep as liquidated damages. For a home of up to four units that you intend to live in, Civil Code section 1675 treats a liquidated damages payment of up to 3% of the purchase price as valid unless you show it is unreasonable. Above 3%, the seller has to show it is reasonable. Read the deposit and liquidated damages terms of your own contract before you sign it.

2. The down payment, at closing

The down payment is usually the largest piece, and it depends on the loan program. On a $850,000 home, 20% down on a conventional loan is $170,000. FHA's 3.5% minimum is $29,750. A VA buyer with full entitlement can put $0 down. Your earnest money is credited against this amount, so the check you bring to closing is smaller by the deposit you already paid.

Conventional loans can also be made with less than 20% down, with private mortgage insurance added to the monthly payment. The FHA guide and the VA guide compare what each program costs every month once you own the home.

3. Closing costs, at closing

Closing costs pay for the loan and the transfer: lender fees, appraisal, title insurance, escrow, recording and transfer tax. sounding plans for them at 2% of the price, which is $17,000 on this example, before prepaid interest and the tax and insurance impounds your lender collects. The closing-cost guide goes line by line through what that covers and who usually pays each item.

In these estimates, two program fees are financed rather than paid in cash. FHA's upfront mortgage insurance premium and the VA funding fee are added to the loan, so they raise the loan amount but not the cash you bring. A buyer who pays either fee in cash instead adds it to cash to close.

The total, by program, on a $850,000 home

These are planning estimates from the same engine that builds the report, not a lender quote. The earnest money you paid in step 1 is part of each total, not an addition to it. Lenders may also want to see reserves left in your account after closing, so plan to have more than the total on hand.

How the final number reaches you

Your lender's Loan Estimate shows an Estimated Cash to Close soon after you apply. The CFPB describes it as the amount due at closing in addition to any money already paid, usually by cashier's check or wire transfer, and notes that the lender will ask for proof of where the funds came from. The Closing Disclosure must reach you three business days before closing, and its Cash to Close should match the Loan Estimate. If it does not, ask the lender why before you sign.

Check your own cash in the report

Under Financing, a sounding report lets you enter the cash you have for the purchase. For each loan program it then says whether that covers the estimated cash to close for the specific home, and by how much you are over or short. To work backward from your income instead, the salary guides for $100,000, $150,000, $200,000 and $250,000 show the cash to close at the highest price each income qualifies for.