Most buyers budget for a down payment—say, 10% of the purchase price—then are surprised when the wire instruction arrives with a bigger number. That's because down payment and cash-to-close are not the same thing. Understanding the difference keeps you from scrambling for funds the week before settlement.
Down payment is one line item
Down payment is the equity you're putting into the property at closing, expressed as a percentage of the purchase price. On a $400,000 home with 10% down, you contribute $40,000 toward the price. That $40,000 reduces your loan amount to $360,000, but it's only the starting point for what you actually wire.
What else goes into cash-to-close
Cash-to-close is the net amount you bring to settlement after accounting for every debit and credit on the Closing Disclosure. Beyond your down payment, you're typically paying:
- · **Prepaid interest** – Per-diem interest from closing day through the end of that month. Close on the 25th and you prepay six days; close on the 3rd and you prepay twenty-eight. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
- · **Escrow reserves** – Two to four months of property tax and homeowners insurance held in an account so your servicer can pay those bills. Lenders collect a cushion upfront.
- · **Title insurance and recording fees** – Owner's policy premium, lender's policy, settlement or attorney fee, county recording charges.
- · **HOA transfer or certification fees** – If the community requires it.
- · **First year's homeowners insurance premium** – Often paid directly at closing rather than financed.
A 10% down payment might represent $40,000, but prepaid interest, six months of escrow, and $4,000 in title/recording fees can push your gross debits to $50,000 or more.
Credits bring the number back down
The settlement statement also shows credits that reduce your wire:
- · **Earnest money deposit** – Already held in escrow; subtracted dollar-for-dollar.
- · **Lender credits** – If you accepted a higher rate in exchange for closing-cost help, that credit appears here.
- · **Seller concessions** – Any amount the seller agreed to contribute toward your costs.
In our example, if you deposited $5,000 earnest money and negotiated $3,000 in seller concessions, your $50,000 gross becomes a $42,000 wire—only $2,000 more than the down payment itself.
Alliance take: read page three of your Closing Disclosure
Page three summarizes cash-to-close in a simple table: loan amount, down payment, closing costs, and credits. Review it at least three business days before settlement so you have time to move money between accounts, and confirm the wire amount with your settlement agent the morning of closing. Wiring the wrong figure—or to the wrong account—delays recording and costs you an extra day of prepaid interest.
Need a clearer picture of your own cash-to-close? Start an application and we'll walk you through a line-by-line estimate before you're ever under contract.