Here’s How You Actually Hand Over the Funds to Buy a House
After weeks of going through the home transaction process — securing a mortgage pre-approval, making an offer, getting a home inspection and an appraisal — you’re finally sitting at the closing table. But how do you actually hand the funds over to <a rel="noreferrer noopener" href="buy%20a%20house?%20Should%20you%20take%20out%20cash%20or%20bring%20your%20checkbook?%20Can%20you%20just%20use%20your%20debit%20card?%20Do%20you%20fill%20up%20a%20briefcase%20with%20dollar%20bills%20and%20plunk%20it%20on%20the%20table?</p>%0A%0A%0A%0A<p>Before%20you%20sell%20or%20purchase%20a%20home,%20you%20need%20to%20know%20how%20it%20all%20works.%20Here%E2%80%99s%20how%20funds%20are%20typically%20handled%20during%20a%20home%20purchase,%20plus%20your%20payment%20options.%C2%A0</p>%0A%0A%0A%0A<h2>Making%20a%20Down%20Payment</h2>%0A%0A%0A%0A<p>Unless%20you%E2%80%99re%20purchasing%20a%20home%20with%20a%20zero-down%20mortgage,%20you%E2%80%99ll%20be%20expected%20to%20pay%20your%20<a%20href=" https: target="_blank">down payment at closing. According to Attom Data Solutions, the average buyer pays about 8 percent for their down payment. However, a down payment can be as low as 3 percent of the purchase price of the home, depending on the loan and the mortgage lender.
“The down payment must come from acceptable, verified assets such as checking or savings, investment accounts, and retirement accounts,” says Erin Craggs, vice president of credit quality at Guaranteed Rate. “The down payment is made with a cashier’s check or wire transfer from your bank. The funds are given to the title company’s closing agent at the closing of the mortgage.”
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Paying Closing Costs
The buyer is also typically expected to pay closing costs, which are fees and expenses incurred during the mortgage process that are paid to the lender. Closing costs vary and generally depend on your location and your lender. Average closing costs can range from 2 to 5 percent of the purchase price.
“These costs are paid by the borrower in addition to the down payment at the closing of the mortgage. It is possible to reduce closing costs with seller concessions, which are negotiated on the purchase agreement of the home,” Craggs explains.
Closing costs can be paid out of your own pocket — usually with a cashier’s check or wire transfer from a checking or savings account — or they can also be rolled into the mortgage. However, not all lenders allow this and the rules may vary depending on your loan type.
What About the Seller? How Are They Paid?
Home sellers can typically expect payment after closing. How quickly the seller has the funds in hand depends on the property’s location and the payment method, among other factors.
“Sellers are paid by cashier’s check or wire transfer after the close of escrow,” adds Craggs. “In most states, the seller receives funds on the day of closing. [This is known as wet funding.] In a few states, there is a short wait period of a few days before the release of funds to the seller. [This is known as dry funding.]”
Paying Your Mortgage
You’ve signed your closing documents, made all of your payments at closing, and now you have the keys to your new home. But your payments don’t end here.
“Mortgages are paid in arrears,” Craggs says. “Your first mortgage payment is due on the first of the next month after you have lived in the home for 30 days.” You’ll be expected to make monthly mortgage payments until your home is completely paid off.