Cash to Close and Escrow 101 When Buying A Home

“Cash to close” when buying a home is the combination of everything. It is the total of your down payment, prepaid items, and closing costs. 

I once met with a client whose loan officer had emailed them saying, “Your cash to close is $2,322." I went through everything with him line by line and pointed out the fact that the $2,322 was the difference between the closing costs total minus the $5,000 the seller was paying. The loan officer had neglected to add the $5,600 down payment, making the estimated cash to close about $5,600 wrong. Had that client not spoken with me, and if I hadn't gone through everything line by line, he would have been in for the shock of his life on closing day. 

Unfortunately, this is not uncommon, but it should be and can be if you educate yourself and partner with an experienced and detailed loan officer that is looking out for your wants and needs. 

Escrow 101

Above and beyond your principal and interest payment, you likely have an escrow account. About 9 out of 10 clients I work with have an escrow account. Escrows are your prepaid taxes and insurance, as well as mortgage insurance.

If your home insurance is $1,200 a year vs. $1,210, $1,500, or $2,400, that changes your cash to close as well as your monthly payment. An escrow account is another way that loan officers can misinform you on your numbers. They must ask when your insurances and taxes renew in order to be accurate. 

Always remember one number on a home loan changes all the numbers. As an example, a $1,000 versus a $1,200 tax bill changes your monthly payment and your cash to close. 

If you live in Louisiana, Arkansas, Mississippi, Alabama, and Florida and want to learn more about working with me on your mortgage, check out my other website, and for more information about Mortgage Escrow watch my video:

Mortgage Escrow Explained [What is Mortgage Escrow?]

Watch On YouTube:

October 29, 2020
Mortgage Tips