Now that we’re getting closer to your closing date, it’s time to get your down payment ready! Remember that in addition to the down payment you need approximately 3 to 6% of the purchase price on top of the down payment available in cash for the closing costs.
If any of these funds are going to be gifted to you from a family member, you need to let your mortgage lender know right away so he or she can get approval from the underwriter for the funds. Often your mortgage lender will ask for a gift letter from the person gifting you the funds. This letter simply acknowledges that the money is considered a gift and does not need to be repaid. (NOTE: Gift letters are most common with government backed loans such as FHA, VA or USDA).
It’s best if the down payment and closing cost funds are transferred into one account. This account must be disclosed to your mortgage lender and you must let him or her know this is the account you’re going to be using for the down payment as the funds have to be tracked.
One business day before your closing date, either your mortgage lender or title company will email you a close estimate of the amount of money needed to close as well as the wire transfer instructions. Unfortunately, the total amount usually is not available farther in advance as the title company needs to receive final figures from both your lender (if utilizing a mortgage) as well as both attorneys. Amounts under $50,000 can be paid for with a cashier’s check, however, amounts over $50,000 must be wire transferred. He or she will also ask you to transfer extra money, usually $1,000 – $2,000 on top of the estimate, just in case there are any surprises or mistakes found at closing in regards to the numbers, which happens frequently. You’ll wire transfer these funds in one lump payment the DAY BEFORE CLOSING. It is crucial that these funds be wire transferred the day before closing at the latest as the Title company cannot accept it the day of closing. (NOTE: You may also obtain a certified bank check, sometimes called a cashier’s check, at the bank to bring to closing. There is usually a small bank charge for the service).
If the mortgage lender is unable to give you the exact amount due you will need to obtain a cashier’s check (or wire transfer) for the estimated amount and bring a checkbook with you to closing. Typically, the title company will allow you to write a personal check for any overage as long as the amount is less than $1,000.
While it would be nice to wire transfer the funds several days in advance, often the title company doesn’t have the exact figures until the day before. Therefore, call your bank now and find out what you need to do to make a wire transfer. Most of the time you have to go into the bank personally to initiate the wire transfer. Also, find out what their cut off time is for wire transfers. Usually it’s around 4pm. That means you’ll have to do the wire transfer by that time the day before closing in order for it to go into the title company’s account on time. Once you’ve done the wire transfer, email myself as well as mortgage lender so we can make sure the title company received the funds.
Lastly, explain to your work that you need to leave for a little while the day before closing in order to initiate the wire transfer and make sure that is OK with them.
At closing, any overage/extra money you paid will be refunded back to you at the very end of the closing via a check.
PLEASE NOTE: There have been a number of hackers and scammers lately trying to divert (ie. steal) closing funds to their personal accounts and away from the title companies. Generally, the wire transfer instructions will be emailed to you from your mortgage lender, however, occasionally they will be sent to you from your attorney or from me. DO NOT FOLLOW WIRE TRANSFER INSTRUCTIONS SENT FROM ANYONE ELSE. ONLY FOLLOW WIRE TRANSFER INSTRUCTIONS SENT TO YOU YOUR MORTGAGE LENDER OR TITLE COMPANY. If you want to verify that the wire transfer instructions you received are legit, call the title company and they can verify them with you via phone.
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