# What is cash to close, and how much do you really need?

Source: https://nobullshitloans.com/buy/cash-to-close/
By Tyler Rood, Loan Officer, NMLS ID # 2064776, Edge Home Finance, LLC (NMLS ID # 891464). Updated 2026-11-09.

## The short answer

Cash to close is your down payment plus closing costs, prepaids and the starting escrow deposit, minus seller or lender credits, and my rule of thumb puts it at about 8% to 10% of the price with 5% down on a conventional loan ($28,000 to $35,000 on a $350,000 home). A first-time buyer putting 3% down needs about 6%. Earnest money you already paid counts toward it. Reserves are separate: savings still in the bank after you close.

Most buyers plan for the down payment and meet the rest of the bill later. That gap is where closing-table panic comes from, so I put the full number in front of every buyer right next to the monthly payment. The question I hear most is "how much cash do I need to close?" My answer starts with one line: down payment plus closing costs equals total cash to close, and the down payment is often only about half of it. Here is every bucket, how I estimate each one before a single fee is quoted, and the ways to bring less.

## What does cash to close mean?

Cash to close is all the money you bring to buy the house: the down payment, the closing costs, and the prepaid items that start your escrow account. Closing costs are one piece of it, not the whole thing, which is why "cash to close vs closing costs" trips so many people up. And yes, cash to close includes the down payment.

Your Closing Disclosure marks cash to close "from borrower" when you bring money and "to borrower" when money comes back to you, which mostly happens on a refinance.

## The four buckets of cash to close

| Bucket | What is in it | What sets the size |
|---|---|---|
| Down payment | Your share of the price | Your program's minimum, and your choice |
| Closing costs | Lender charges, appraisal, credit report, title and settlement, Virginia recordation taxes and recording fees | The lender, third parties, the state and the county |
| Prepaids and escrow | First year of homeowners insurance, interest to the end of your closing month, a starting balance for taxes and insurance | Your premium, your closing date, your county's tax rate and due dates |
| Reserves | Savings left in the bank after closing | Sometimes your loan program, always my advice |

The first three are your total cash to close. Reserves stay in the bank, but they belong in the plan. Earnest money is not a fifth bucket: it is cash to close you pay early.

## How much cash do I need to close? My planning rule of thumb

Before I have a single fee quote, I plan cash to close as a percentage of the price. These are my rules of thumb from closing loans, not program rules, and they come before any seller credit:

- **Conventional loan, 5% down:** about 8% to 10% of the price. When I need a fast number, I run it at 10.
- **First-time buyer, 3% down:** about 3% down plus about 3% for costs, roughly 6%.
- **VA loan, no down payment:** closing costs and prepaids only, roughly 2% to 3% of the price.

| Price | 3% down first-time buyer (about 6%) | 5% down conventional (8% to 10%) |
|---|---|---|
| $300,000 | $18,000 | $24,000 to $30,000 |
| $350,000 | $21,000 | $28,000 to $35,000 |
| $400,000 | $24,000 | $32,000 to $40,000 |
| $500,000 | $30,000 | $40,000 to $50,000 |

Here is the rule tested line by line on a hypothetical $350,000 home in Chesterfield County, with 5% down on a conventional loan and an April 15 closing.

**Worked example: Total cash to close: $350,000 Chesterfield home, 5% down**
- Down payment (5%): $17,500
- plus Closing costs (my 3% planning number): $10,500
- plus Prepaids and starting escrow (broken out below): $3,216
- equals: Total cash to close: $31,216
Note: About 8.9% of the price, inside my 8% to 10% range.
_Hypothetical conventional loan of $332,500 at an example rate of 6.5% on a 30-year fixed._



**Chart: What $31,216 of cash to close pays for.** The down payment is the biggest piece, but closing costs, prepaids and escrow add almost $14,000 on top of it.

| | Part | Amount |
|---|---|---|
| Total cash to close, $350,000 home with 5% down | Down payment | $17,500 |
| Total cash to close, $350,000 home with 5% down | Closing costs | $10,500 |
| Total cash to close, $350,000 home with 5% down | Prepaids and starting escrow | $3,216 |
| Total cash to close, $350,000 home with 5% down | Total | $31,216 |

_Hypothetical conventional loan of $332,500 at an example rate of 6.5% on a 30-year fixed._


In my files, closing costs alone run about 2% to 3% of the price, so 3% is a planning number, not a padded one.

## Total cash to close vs remaining cash to close

My estimates show two numbers, and mixing them up causes a lot of needless panic.

- **Total cash to close** is the cost of the deal before any credits.
- **Remaining cash to close** is what is left after every credit and every dollar you have already paid. That is your closing-day wire, and it matches the cash to close line on your final Closing Disclosure.

Your earnest money deposit and the appraisal fee you paid during the contract are already inside the total. They come off the remaining number. They are not extra on top.

**Worked example: From total to remaining: the same $350,000 home**
- Total cash to close: $31,216
- minus Seller credit (3%, the conventional limit at 5% down): $10,500
- minus Earnest money deposit, paid at contract: $3,500
- minus Appraisal fee, paid when it was ordered: $550
- equals: Remaining cash to close (your wire): $16,666
Note: Your own money in the deal is $20,716 (the wire, the deposit and the appraisal fee), and the $17,500 down payment sits inside it.
_Hypothetical. A seller credit counts only if it is written into the purchase contract._


Round up when you plan: if the estimate says $16,666, have $17,000 ready. I'd rather you have too much money than not enough, and the number usually drifts lower as real quotes replace my estimates. Pay the deposit from your own account, or have a documented gift cover it, because the lender has to trace every dollar.

## The least you can bring: credits never cover your minimum down payment

Credits pay costs. They never pay your program's minimum down payment, which has to come from your own documented money, a documented gift or an approved assistance program. Take an FHA purchase at $300,000. The minimum is 3.5%, or $10,500. Say closing costs, prepaids and escrow add $7,300, for a total cash to close of $17,800. FHA lets the seller and other interested parties contribute up to 6% of the sales price ($18,000 here), so a seller credit can cover the whole $7,300. The $10,500 still comes from you, and the earnest money you already paid is part of it. That is the realistic target for a buyer with limited cash: cash to close near the program minimum, with the seller and the lender covering the rest.

## What are prepaid items at closing?

Prepaids are bills you pay ahead at closing so your loan and your escrow account start clean:

1. **Homeowners insurance:** the first year, paid in full.
2. **Prepaid interest:** from your closing day through the last day of that month.
3. **The starting escrow deposit:** a cushion in the account your loan servicer uses to pay your property taxes and insurance out of your monthly payment.

I tell almost everyone to keep escrow, high earners included. One forgotten tax bill is a real risk, because if property taxes go unpaid, the county's claim on the house comes ahead of the bank's.

**Worked example: Prepaids on the same home, closing April 15**
- First year of homeowners insurance: $1,500
- plus Prepaid interest, April 15 to 30 (16 days at about $59): $947
- plus Escrow deposit: 2 months of property tax: $519
- plus Escrow deposit: 2 months of insurance: $250
- equals: Prepaids and starting escrow: $3,216
Note: Chesterfield's 2026 rate is $0.89 per $100 of assessed value, about $3,115 a year if the home is assessed at $350,000.
_Hypothetical. Get a real insurance quote. The number of escrow months depends on your county's tax due dates._


On a purchase I usually plan about two months of taxes and insurance for the starting escrow. The real starting deposit is set by when your county's bills are due (in Chesterfield, June 5 and December 5), and that is covered on my page about [property taxes and escrow](https://nobullshitloans.com/virginia/property-taxes/).

## What is the best day of the month to close?

Your first mortgage payment is due on the first day of the second month after you close, and each payment covers the interest for the month before it. So the days between closing and the end of your closing month get paid at the table, and the date changes your cash to close.

| Closing date | Prepaid interest (this example) | First payment due |
|---|---|---|
| April 30 | 1 day, about $59 | June 1 |
| April 15 | 16 days, about $947 | June 1 |
| May 1 | 31 days, about $1,836 | July 1 |

That July 1 first payment is not a free month. You paid May's interest at closing. My rule: if cash is tight, close near the end of the month. If the seller is covering your costs, the first of the month is fine, because the credit absorbs the interest.


**Chart: Prepaid interest by closing date.** Close on April 30 and about $59 of interest goes on the table. Close one day later, on May 1, and it's about $1,836.

|  | Prepaid interest at closing |
|---|---|
| April 15 | $947 |
| April 30 | $59 |
| May 1 | $1,836 |

_Hypothetical conventional loan of $332,500 at an example rate of 6.5% on a 30-year fixed, about $59 of interest a day. Not a quote._


## How to reduce cash to close

Closing costs have to be paid by someone. The only question is who. These are the levers I pull, in the order I usually pull them:

1. **Put down the program minimum, not more.** Every extra dollar down is a dollar of cash to close. The minimums are on my page about [how much down payment you need](https://nobullshitloans.com/buy/down-payment/).
2. **Ask the seller for a credit,** written into the purchase contract before the appraisal is ordered. Ask for the full amount you need. The worst thing that happens is they say no.
3. **Take a lender credit.** A slightly higher rate can have the lender pay part of your costs. The price is a higher payment for as long as you keep the loan, so I show you the break-even (more on [points and lender credits](https://nobullshitloans.com/buy/points-and-buydowns/)). If the seller ends up covering everything, the credit comes off and the rate steps back down.
4. **Close near the end of the month,** unless the seller is covering your prepaid interest.
5. **Use a documented gift.** Family help is the first place I look, before any assistance program. Here is [how gift funds work](https://nobullshitloans.com/buy/gift-funds/).
6. **Ask your employer about relocation help** if you are moving for a job. I have seen employers cover a buyer's closing costs.

Seller credit or price cut? A $10,000 price cut lowers your principal and interest by about $60 a month at an example rate of 6.5% with 5% down, while a $10,000 credit is $10,000 that stays in your account on closing day. When cash is the tight spot, my rule is concessions over reductions, and the full math lives on my page about [making a strong offer](https://nobullshitloans.com/buy/making-an-offer/).

## How much can the seller pay toward closing costs?

Every program caps how much the seller and other interested parties can put toward your costs. These are the program rules as of November 2026:

| Loan | Seller and interested-party limit |
|---|---|
| Conventional, primary or second home | 3% of the price with less than 10% down; 6% with 10% to under 25% down; 9% with 25% or more down |
| Conventional, investment property | 2% |
| FHA | 6% of the sales price |
| VA | No VA limit on credits for normal closing costs; concessions on top (such as paying the funding fee or your debts) are capped at 4% of the home's reasonable value |
| USDA | 6% of the sales price |

Conventional limits are measured against the lower of the price or the appraised value. The same ground rules apply on every loan:

- A credit pays real costs only: closing costs, prepaids, discount points or a rate buydown. No cash back, and never your minimum down payment.
- Excess over the cap does not become cash for you. Fannie Mae and FHA treat it as a cut in the price, and FHA treats a credit bigger than your actual costs the same way.
- It has to be written into the purchase contract, and the plan only works if the home appraises at the contract price.
- A lender credit is not seller money. On FHA loans, a lender credit from a higher rate does not count toward the 6%, as long as the lender is not also the seller, builder or agent. Fannie Mae also leaves a lender credit that comes from a higher rate out of its 3%, 6% and 9% limits. Freddie Mac words its rule separately, so on a Freddie Mac loan I confirm it on your file.

Program limits change, so check with me before a credit is written into an offer.

## Why my estimates run high on purpose

I hate surprises, even on my birthday, so every estimate I send is built to be beaten. Insurance is modeled high until a real quote arrives, title and recording stay conservative until the settlement agent's numbers come in, prepaid interest assumes a mid-month closing, and a lender credit does not count until it is priced. When real numbers replace estimates, they tend to move in your favor. The first fee sheet is an estimate, the Loan Estimate follows a complete application, and the final Closing Disclosure is what you wire against.

**My take**
I'd rather tell you it costs more and then it costs less. A buyer who planned on the high number walks into closing relaxed, with money to spare. A buyer who was quoted low to make a lender look cheap walks in scrambling, and scrambling is how deals get hurt.


## Reserves: the bucket that stays in the bank

Reserves are not part of your cash to close, but they belong in the plan. Some loans require them (in my files, investment purchases usually need about six months), and even when the lender asks for nothing, I want you closing with about six months of your must-pay bills in savings. An owner has no landlord to call when the water heater dies. How I size that number is in my [Wheel of Wealth](https://nobullshitloans.com/wealth/wheel-of-wealth/).

## Cash to close in Virginia: the local line items

Virginia adds recordation taxes that national estimates often miss: the buyer customarily pays state and local recordation tax on both the deed and the deed of trust, roughly one-third of 1% of the price plus one-third of 1% of the loan, which comes to about $2,400 with clerk fees on the $350,000 Chesterfield example (assuming the county adds its local share; your settlement agent confirms the exact figure). Every line, including the seller's grantor tax and title insurance, is on my page about [Virginia closing costs](https://nobullshitloans.com/virginia/closing-costs/), and you can run your own numbers in the [Virginia cash to close calculator](https://nobullshitloans.com/tools/cash-to-close/).

Start with the percentage rule, then swap in a real number for each piece as you get it: your program's minimum down payment, a real insurance quote, your county's tax rate, your closing date and whatever the seller agrees to. When the estimate in front of you is built from those, you know your number before you write an offer, not after.

## Frequently asked questions

### How much cash do I need to close on a VA loan?

With full entitlement there is no down payment, so your cash to close is closing costs and prepaids, which run roughly 2% to 3% of the price in my files. If you are not exempt from the VA funding fee, it can be added to the loan instead of paid in cash. A seller can also pay your normal closing costs with no VA limit, plus concessions up to 4% of the home's reasonable value. The fee itself is explained on my [VA funding fee](/veterans/va-funding-fee/) page.

### Can closing costs be rolled into my loan on a purchase?

Generally not. On a purchase the loan amount is set by the price and your down payment, so closing costs get paid in cash or covered by seller and lender credits. The exceptions are program fees, such as FHA's up-front mortgage insurance premium and the VA funding fee, which are usually added to the loan. A refinance works differently, and costs often go into the new loan there.

### Why is my cash to close higher than my Loan Estimate?

Part of a jump can be permanent, such as a lender credit that priced smaller than assumed, a lower appraisal that changed your loan amount or mortgage insurance, or a rate lock extension. Part is usually prepaids and escrow rebuilt on your real tax bill, insurance quote and closing date, which is your own money set aside for your own bills. If a number looks wrong, send me the page before closing day and I will walk through it with you line by line.

### Does the home inspection count toward my cash to close?

No. You pay the inspector yourself, usually in the first days of the contract, and it sits outside the cash the lender counts toward closing. In my files around central Virginia, an inspection typically runs $300 to $500. The appraisal is different. You also pay it up front, but it is a closing cost, so if the deal closes it shows on your Closing Disclosure as already paid, and if the deal dies you do not get it back.

### How do I pay my cash to close?

Your settlement agent, the closing attorney or title company, tells you which forms of payment it accepts. For the main amount that is usually a wire or certified funds such as a cashier's check. Before you wire anything, look up the settlement agent's phone number yourself, never the one in the email, call it and confirm the instructions, which is one of the rules on my [what not to do before closing](/buy/what-not-to-do-before-closing/) list.

## Sources

- [Fannie Mae Selling Guide B3-4.1-02, interested party contributions](https://selling-guide.fanniemae.com/sel/b3-4.1-02/interested-party-contributions-ipcs)
- [HUD Handbook 4000.1 (Update 18), interested party contributions](https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf)
- [VA, VA funding fee and loan closing costs](https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/)
- [7 CFR 3555.102(h), USDA limit on seller contributions](https://www.law.cornell.edu/cfr/text/7/3555.102)
- [Code of Virginia, Title 58.1, Chapter 8, recordation taxes](https://law.lis.virginia.gov/vacodefull/title58.1/chapter8/)
- [Chesterfield County, real estate tax rate (FY27 adopted budget)](https://www.chesterfield.gov/CivicAlerts.aspx?AID=7172)

## Disclosures

Individual Originator: Tyler Rood, Loan Officer, NMLS ID # 2064776 (www.nmlsconsumeraccess.org). Licensed in NC, PA, TX and VA.
Edge Home Finance, LLC | NMLS ID # 891464 | www.nmlsconsumeraccess.org. Licensed in all U.S. states & D.C., EXCEPT New York. Edge Home Finance, LLC is a mortgage broker, not a direct lender or creditor. Virginia Broker License MC-7006. North Carolina Mortgage Broker License B-201539. Pennsylvania Mortgage Broker License 81041. Texas: Mortgage Company License, Department of Savings and Mortgage Lending.
Numbers on this page are illustrations, not offers. Any rate shown on this site is an example. Rates may change or may not be available at the time of loan commitment or lock-in.
Edge Home Finance, LLC is a private mortgage broker and is not affiliated with, endorsed by, or acting on behalf of or at the direction of the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), or any other government agency.
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