Estimated Cash-to-Close

The terms get incorrectly used interchangeably but are actually different. Closing costs and prepaids are expenses necessary to close on your home. Cash to Close is the total net amount you pay at the actual loan signing and is the net sum total of the closing costs, prepaid items, discount points, down payment, and after the application of any credits.  The earnest money deposit paid when an offer was made is deducted from cash-to-close.

The loan estimate and the escrow section of the loan estimate are right by each other and they can be confusing. Estimated closing costs show the loan or the actual closing costs; the bigger number is the prepaid taxes and insurance appears above the estimated cash-to-close.  Lender credits or any other credits are deducted. The bottom line of the loan estimate is estimated cash-to-close. On the second page, the estimated cash-to-close is broken down.  

Paying Property Taxes

Determining property taxes based on the closing date can be done by looking at this table. If the loan closes in September, the first payment is due on November 1st. Meaning the borrower needs to set aside a certain amount of money within that escrow or impound account for the bank to pay the property tax bill and the insurance bill from the monthly mortgage. The amount depends on the month the loan is closed in. The property tax installment due date determines the total amount set aside. Property taxes aren’t closing costs they are prepaid escrows that are set aside to pay taxes and insurance. They are not fees from the lender, they are money the county is owed.