Your down payment is the part of the purchase price you pay instead of financing it. Cash to close is the amount you must bring to settlement after accounting for closing costs, prepaid expenses, deposits, credits and other adjustments. Planning for both helps you compare mortgage options without confusing the down payment with the entire upfront budget.
What belongs in the upfront budget?
Start with the down payment. Then review lender and third-party charges, applicable taxes, initial insurance premiums, prepaid interest and any initial escrow deposit. Some expenses may be paid earlier in the transaction. The Loan Estimate and later Closing Disclosure show how the figures fit together. Your final amount depends on the property, closing date, program and approved credits.
Key minimums and deadlines
Conventional loans can start at 3% down for eligible borrowers through Fannie Mae's standard 97% LTV option for first-time homebuyers, Fannie Mae HomeReady and Freddie Mac Home Possible; HomeReady and Home Possible are limited to incomes at or below 80% of area median income. FHA requires a minimum investment of at least 3.5% of the lower of the purchase price or the appraised value with a credit score of 580 or higher, or at least 10% of that same value with a score of 500 to 579. Federal rules require that you receive your Closing Disclosure at least 3 business days before closing; for this rule, business days include Saturdays but not Sundays or federal public holidays. The CFPB estimates that closing costs typically range from 2–5% of the home purchase price, not including your down payment. Treat that as a rough estimate, and plan around the Estimated Cash to Close on your Loan Estimate.
These are minimums; lender requirements may be stricter.
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How does a simple cash-to-close calculation work?
Suppose a hypothetical purchase has a $25,000 down payment, $8,000 in closing costs and $4,000 in prepaid expenses and escrow deposits. That totals $37,000 before adjustments. If the buyer has already paid a $5,000 deposit and receives an allowable $3,000 seller credit toward eligible costs, the simplified remaining cash to close is $29,000.
This is arithmetic, not a quote or a statement of credit limits. Actual forms may contain additional prorations and adjustments. A seller credit does not automatically replace a required down payment, and the program must permit both the credit and its use.
Why do estimates change before closing?
Property taxes, insurance selections, the settlement date and transaction details can affect the estimate. Ask which items are lender charges, which are third-party costs and which are prepaid ownership expenses. If a revised disclosure arrives, compare it with the prior version and ask what changed. Do not assume that every difference is a new lender fee.
Does a lender credit mean the loan is free?
A lender credit can reduce cash due upfront but may involve a higher interest rate than another available option. Compare the payment, upfront costs and expected holding period together. An option with less cash due at closing can still cost more over time. Ask Cole to walk through the actual alternatives on the same loan amount and loan type.
Can closing costs be financed?
The answer depends on the transaction and program. Purchase and refinance loans do not treat every cost the same way. Do not assume you can add all purchase costs to the loan amount. Have Cole explain which costs you must pay, which credits are permitted, and whether any program-specific financed fees apply to your scenario.
What should you verify before sending funds?
Ask the settlement provider to explain the final amount and approved payment method. Independently verify wire instructions using a phone number you already know is legitimate. Treat an unexpected change in payment instructions as a reason to call and verify before transferring money. Keep evidence of your deposit and the source of funds so the transaction can be reconciled.
How can Cole help you compare the options?
Bring the purchase price, available savings, estimated deposit and any proposed credits to the conversation. Cole can help distinguish the payment decision from the upfront cash decision. Start with the preapproval checklist and mortgage rate guide, or apply securely.
Source: CFPB Loan Estimate explainer, including estimated cash to close, closing costs and lender credits. Reviewed October 24, 2026.
By Cole Simmons, NMLS #1127011. Updated .
General educational information; not a commitment to lend. All loans are subject to underwriting approval. Requirements, credits, costs and program availability vary by lender, transaction and state. Not all applicants qualify. Edge Home Finance, LLC NMLS #891464. Equal Housing Opportunity.