You’ve set aside funds to use as a down payment on your new home. As your closing date approaches, you’ll need to make sure that your down payment is readily available so it can be at the title company on or even before closing day. Related Reading: Steps to Buy a Home.
How did you get your down payment?
Your lender has already asked specific questions about how you funded your down payment. They have to provide proof of the source of your funds to your future mortgage company.
If your down payment funds are in your checking or savings account, keep them there for now and skip down to the “How much will I have to bring to closing?” section of this post.
If a friend or family member gave you money for your down payment, your lender will request a gift letter from the giver. This letter states that the funds are indeed a gift. It will most likely not be acceptable to have someone lend you funds for the down payment. Tell your lender about this gift now so that paperwork can be prepared accordingly. Let your gift giver know when the funds need to be available to you or directly to the title company.
- Liquidating Assets
You need to start the process now if you are planning to liquidate stocks or bonds, or borrow against a 401K. The funds will need be available in time for closing.
- Equity of Your Current Home
If you are using a Home Equity Line of Credit (HELOC), hopefully you have already started that process. If not, please let me know now so that I can prepare the seller for a potential delay.
If your current home is under contract, please keep us informed on how things are going. In Colorado, the buyer has many opportunities to terminate their contract. In fact, a buyer can terminate a contract right up until closing. Keep our team informed and we will do the best we can to protect you on your buying side.
The lender will require you to provide an estimated settlement statement as proof that there is indeed enough money available for your next home.
You can coordinate the transfer of funds directly between the two title companies. Ideally, early in the process, you will give the contact information of the title company of the home you are buying to the title company of the home you are selling. Alternatively, you might elect to receive a check of sales proceeds directly your selling title company and make the down payment for your future home available separately at time of closing.
Related Reading: Down Payment Assistance
How much money will I have to bring to closing?
Your lender will send you a closing disclosure about 3 days before your closing date. The closing disclosure will list all charges. Your lender will call you to go through all the charges with you. If you do not hear from your lender, give them a call and request an explanation for each charge.
The closing disclosure will provide a final number of the amount you will have to “bring to the closing table”. Please note that the earnest money you submitted at the beginning of your transaction has been applied to this amount.
How will you bring these funds to closing?
- You can bring a cashier’s check to closing in the amount noted on your closing disclosure.
- You can wire your funds. No cash. We recommend ordering your wire the day before closing.
NOTE: A shocking increase in wire fraud in recent years has caused many buyers to prefer a cashier’s check. If you need to wire funds, call the title company directly to confirm wire instructions. We will not send wire instructions. If you receive wire instructions from what seems to be our account or anyone other than your title company, please ignore them. Do NOT call the phone number of a possibly fraudulent email.
What if the amount changes?
The title company will give you a check if the final amount for closing costs changes after you have wired the money to the title company or you have procured a cashier’s check from the bank.
If the amount is more than what you wired or put on your cashier’s check, then you’ll have to bring an additional cashier’s check to make up the difference. Some title companies will take cash if the amount is under $5, but most will not take cash at all. Some will accept a personal check if the owned amount is under $100. I had a closing where the check was off by one cent and the closing agent had to get it approved for the buyer to put in the additional penny.