Cash Needed at Closing

[Noah Barba]

Hey BP, just a quick question: What kind of expenses are needed to be paid in cash when purchasing a property? I know that there is the downpayment and closing costs (which include lender and third party fees). Are there any other expenses to note? I've read something about prepaid expenses, but I'm sort of lost in all the real estate lingo. A quick explanation of all the cash expenses need at closing would be so helpful. Thanks so much for your time!

[Guifre Mora]

Originally posted by @Noah Barba:

Hey BP, just a quick question: What kind of expenses are needed to be paid in cash when purchasing a property? I know that there is the downpayment and closing costs (which include lender and third party fees). Are there any other expenses to note? I've read something about prepaid expenses, but I'm sort of lost in all the real estate lingo. A quick explanation of all the cash expenses need at closing would be so helpful. Thanks so much for your time!

 
There is a difference between prepaid, closing costs and fees. Prepaid items are not closing costs. They are monies that would have been paid anyway -- new home loan or not.

Closing costs can include things such as:

• Payments to title companies
• Attorney fees
• Governmental title recording fees
• Lender fees (Points, Underwriting fees, Processing fees, pens and pencils used to sign your docs)

Prepaid costs can include things such as:

     The homeowner's insurance premium paid upfront as well as into an escrow account.

      Real estate property taxes paid into an escrow account. 

      Mortgage interest (also known as per diem interest) that accrues between the closing date and month-end

If you're unsure about whether a certain item is included in closing costs or prepaid, just ask yourself a simple question: "Is this a charge that I would have if I wasn't borrowing to buy the house?" If the answer is "yes," it's a prepaid item.