Understanding "Funds-to-Close" When Buying a Home

Mortgage and Lending with CMG Mortgage, San Diego, CA NMLS 259027


("How much money do I need to "bring in" to buy my home, and where does that money go?")


The terms "Funds (or "Cash") to Close" refer to the total amount of money the Borrower/Buyer will bring in to purchase the new home.  The amount of money "brought in" can be summarized in the following categories:

  1. Down Payment -- The difference between the loan amount and the purchase price.  Most Buyers/Borrowers will earmark either a "set dollar amount" or a "percentage of the purchase price" for their Down Payment.
  2. Non-Recurring Closing Costs (NRCC's) -- these are the "one-time costs" associated with creating the new mortgage.  These NRCC's can be broken down into 2 sub-categories:
    • Lender "Origination" Fees -- This amount will vary depending on which interest rate is selected (higher rates = lower Origination Fees, while lower rates = higher Origination Fees) 
    • Third Party Fees -- These fees relate to other Vendors involved in the escrow.  Examples of Third Party Vendors include (but are not necessarily limited to): Title Insurance, Escrow Company, Appraiser, County Recorder, Notary, Homeowners Association (HOA), etc.  NOTE: These fees may not be "marked up" by the Lender (so they will be what they will be). Most Lenders do not know which Third Party Vendors will be involved (much less their fees) before a property is under contract and escrow is opened (this is why Lenders will estimate the total NRCC's up front, then revise them upon discovery of which Third Party Vendors are involved, and what their specific fees are) 
  3. Recurring Costs (RC's) -- These are "ongoing costs of homeownership collected up front" when buying a home.  THESE ARE NOT FEES TO ACQUIRE THE MORTGAGE LOAN (and therefore should not be co-mingled into the NRCC's category above when shopping for a loan). Examples of RC's include (but are not necessarily limited to) include:
    • Homeowners (aka Hazard) Insurance - 1 Year Policy paid in advance (this money is collected "through escrow" and paid directly to your Homeowners Insurance Company) 
    • Impound (aka Escrow) Account - Initial deposit of a prorated amount of Property Taxes and Homeowners Insurance (your money, which will be applied to future payments of Property Taxes & Homeowners Insurance payments). Depending on the loan program, Impound Accounts are optional. Click here for an example of a California Property Tax Impound Chart.
    • Per Diem (aka "Per Day") interest charges.  Daily interest charges begin the day the loan funds (aka "the day the Lender let's go of the money for the new loan amount"). Per Diem interest is collected from the calendar day the loan funds, all the way through the end of that calendar month (so the later in the month the loan funds, the less days of "Per Diem interest" are collected). As this number is factored into the Annual Percentage Rate (APR), I recommend taking the APR portion of any Lender quote with a grain of salt. For more information about how Lenders can initially manipulate the APR to lure you in, click hereThere are also "prorations" often collected to make sure property taxes are not "overpaid by the Seller" or "underpaid by the Buyer". 

Jason Gordon Mortgage AmeriFirst Financial San Diego


Related Topic: How to Calculate an FHA Mortgage Payment

Related Topic: FHA vs Conventional (Pros & Cons for each)


Now that you have a strong understanding about the above-referenced topic, it is time to get a better understanding of your mortgage quote.  Before you go any further, please CLICK HERE to learn about The Truth Behind Mortgage Advertising.


~ "Loan Amounts" Matter Too! ~

Conforming Loan Amount limits vary among different counties across the country (and change approximately once every 12 months).  As an example, the conforming loan limits (for a 1 unit property in San Diego County as of 2024) are as follows:

CONFORMING - Loan amount up to $766,550 

HIGH BALANCE CONFORMING - Loan Amounts from $766,551 - $1,006,250

JUMBO (NON-CONFORMING) - Loan amounts of $1,006,251 and above

(NOTE: The High Balance Conforming Loan Limit in Los Angeles and Orange County is $1,149,825)

To learn the Conforming Loan Limits for other Counties, please CLICK HERE

Please note that pricing (rates/fees) and approval guidelines will often vary between the 3 above Loan Amount categories. 

As I am sure you can imagine, the above information is merely the tip of the iceberg when it comes to pursuing a new home and mortgage.  Consider this information an initial "cheat sheet" to get you started.  

Please remember that I am more than happy to answer questions specific to the plan you are pursuing. Please do not hesitate to contact me if/when I can be of further assistance.  Thank you for taking the time to read this information.

Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em:

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Oct 28, 2022 12:55 PM