Cash-To-Close Mortgage Guidelines On Verified Funds

This ARTICLE Is About Cash-To-Close Mortgage Guidelines On Verified Funds

All funds used in the mortgage process needs to be documented. Cash money is non-existent in the mortgage industry. Understanding the mortgage process is imperative for home buyers.

  • This holds especially true to first time home buyers
  • Many home buyers are often confused with closing costs versus cash-to-close
  • They also get confused on the Loan Estimate versus Closing Disclosure
  • The mortgage process does not need to be stressful if borrowers understand the various steps of the mortgage process
  • It is the loan officer’s responsibility to educate their borrowers of the overall loan process in the very beginning
  • Failure to communicate with the borrowers is one of the biggest reasons for customer complaints in the mortgage business
  • If important information is not being conveyed to borrowers by their loan officers, the ending result can be major disappointment or borrowers walking away from the deal
  • Although the home buying process may be an enjoyable one and a great time for families, it is also stressful due to financial considerations

Mortgage terms like cash-to-close, verified funds, pricing adjustments, mortgage locks, DTI, LTV, may be used daily by mortgage professionals but to most borrowers, it may sound Latin. It is the loan officers job to make sure that borrowers understand the basic terms, its meanings, it importance, and how it applies to them. Never assume that borrowers know it. 

Cash-To-Close: Loan Estimate Versus Closing Disclosure

Loan Officers need to explain to their borrowers what a Loan Estimate is and the difference between the LE versus CD.

  • Many times figures in the Loan Estimate is overly disclosed
  • Explain to borrowers that the final numbers will be on the Closing Disclosure and NOT the Loan Estimate
  • The number one question borrowers have is what is the cash-to-close
  • The actual cash-to-close is not known until all figures are in
  • The title company needs to go over figures for both buyers and sellers to determine the actual cash-to-close

The actual cash-to-close will be on the Closing Disclosure.

Closing Costs Versus Cash-To-Close

Here are examples of closing costs:

  • Origination Fees
  • Attorneys Fees
  • Title Charges
  • Recording and Transfer Stamps
  • Appraisal
  • Home Inspection
  • Pre-Paid (Pre-Paid are escrow accounts)
  • Discount Points
  • One year homeowners insurance premiums
  • Other third-party charges

Down Payment And Closing CostsWhat are Closing Costs Versus Cash-To-Close

All borrowers need to come up with down payment and closing costs.

  • Down payment needs to be borrower’s own funds
  • Down payments can be gifted by family members
  • Borrowers will be in charge of home buyer’s closing costs
  • However, they may be entitled to seller credits as well
  • Certain states like Illinois have property taxes paid in arrears
  • Home sellers need to credit buyers the previous year property taxes
  • Home buyers can use property tax proration credits for their down payment and/or closing costs
  • However, buyers still need to show that they have verified down payment funds
  • Most home buyers do not pay closing costs out of pocket
  • Most of our borrowers at Gustan Cho Associates pay their closing costs with sellers concessions and/or lender credit

Sellers concessions and lender credit can only be used for closing costs and NOT down payment.

Qualifying For A Mortgage With A Lender With No Lender Overlays

Property tax proration credit can be used for BOTH down payment and closing costs. For more information on this topic or any other mortgage/real estate related questions, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster a response. Or email us at [email protected] Gustan Cho Associates has a national reputation of being a one-stop mortgage shop. This is to having no lender overlays on government and conventional loans as well as having dozens of non-QM and alternative mortgage programs such as 12-month bank statement mortgages, asset-depletion loans, non-QM mortgages one day out of bankruptcy and foreclosure, and our P and L no doc stated income non-QM loan programs. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Leave a comment