You pay down payment and closing costs in two stages: a small earnest money deposit within a few days of signing the purchase contract, then the rest at the settlement table, delivered by wire transfer or cashier’s check the business day before or the morning of closing. The exact amount you owe on closing day is spelled out in a Closing Disclosure your lender must send at least three business days beforehand.
Earnest Money Comes First
The first money out of your pocket is the earnest money deposit, due shortly after the seller accepts your offer and both sides sign the purchase contract. The amount is negotiable but generally runs 1% to 3% of the purchase price, and most contracts require delivery within one to three business days of the signed agreement. Missing that deadline can put you in breach of contract and give the seller grounds to walk away.
The funds go into an escrow account held by a neutral third party, usually a title company, real estate brokerage, or attorney. The escrow holder keeps the money untouched until closing or until a dispute is resolved in writing or by a court. At closing, the escrow agent credits your earnest money toward what you owe, reducing the check or wire you need to bring that day. You are not paying the deposit twice; it simply moves from escrow into the seller’s proceeds as part of your down payment.
Getting Earnest Money Back
Earnest money is not automatically forfeited if the deal falls through. Standard purchase contracts include contingencies that let you cancel and recover your deposit under specific circumstances. The three most common are a financing contingency (your mortgage application is denied), an inspection contingency (the home has serious defects you aren’t willing to accept), and an appraisal contingency (the property appraises below the contract price and you can’t bridge the gap). Each contingency has a deadline written into the contract. If you back out within that window and follow the required notice procedures, the escrow holder returns your deposit. Miss the deadline or waive the contingency, and the seller has a much stronger claim to keep the money.
In competitive markets, buyers sometimes waive one or more contingencies to strengthen their offer. That is a calculated risk. Without an inspection contingency, you can’t walk away over a bad roof without losing your deposit. Without a financing contingency, a mortgage denial could cost you thousands.
Your Final Number Arrives Three Days Before Closing
The guesswork ends when you receive the Closing Disclosure, a standardized five-page document your lender must deliver at least three business days before your scheduled closing. That timing requirement comes from the TILA-RESPA Integrated Disclosure rule and is not optional.
The first page includes a “Cash to Close” summary, which is the total amount you need to bring to settlement. Page three shows how it was calculated: your total costs minus credits, your earnest money deposit, and any seller contributions. That figure rolls together whatever remains of your down payment after the earnest money credit, all lender and third-party fees, prepaid items like property taxes and insurance, and government recording charges. It should match closely with the Loan Estimate you received when you first applied for the mortgage.
Take the three days seriously. If a number looks wrong, raise it immediately. Federal rules limit how much certain fees can climb between the Loan Estimate and the Closing Disclosure. Lender-controlled charges like origination fees and discount points cannot increase at all unless a qualifying changed circumstance occurs. Third-party services where the lender selected the provider are subject to a 10% aggregate tolerance, and if those fees collectively jump more than 10% above the original estimate, the lender owes you the difference as a fee cure. Services you shopped for independently have no tolerance cap.
Three specific changes to the Closing Disclosure trigger a brand-new three-day waiting period: the annual percentage rate increases beyond the legal tolerance, the loan product changes (say, from fixed to adjustable), or a prepayment penalty is added that wasn’t previously disclosed. Any of these resets the clock and delays closing until the new waiting period expires.
Prepaid Items Inside the Cash to Close
A chunk of your cash to close covers prepaid items rather than traditional costs. These are advance payments for recurring expenses your lender wants funded before you move in: per diem mortgage interest from your closing date through the end of that month, six to twelve months of homeowners insurance premiums, and two to six months of estimated property taxes. The exact amounts depend on when in the month you close and your local tax schedule.
Delivering the Funds on Settlement Day
The actual transfer of your cash to close happens at or just before the closing appointment. Most settlement agents want the funds in their account by the business day before closing or early the morning of. Until the money is confirmed as good funds, the escrow agent cannot record the deed, pay off the seller’s mortgage, cover the real estate commissions, or disburse the seller’s proceeds. A delay in your funds delays everything, including the moment you get the keys.
The title company or escrow officer coordinates the disbursement. They split your payment across a dozen or more recipients: the seller’s existing lender gets a payoff, the real estate agents get commissions, the local government gets recording fees and transfer taxes, and whatever remains goes to the seller as net proceeds. Once your new mortgage is recorded with the county, the deal is done.
Accepted Payment Methods and the Wire Cutoff
Settlement agents accept only two forms of payment for the cash to close: a domestic wire transfer or a cashier’s check drawn on a U.S. bank. Personal checks are rejected because the funds can’t be verified immediately, and most agents won’t accept cash due to federal anti-money laundering rules.
Wire transfers are the preferred method because funds settle the same day through the Federal Reserve system. But wires come with a hard cutoff. Most banks stop processing outgoing wires between 2:00 and 4:00 PM, and missing that window pushes your closing to the next business day. If you are wiring, initiate the transfer early and confirm with your bank that it went through. Expect a wire transfer fee, typically $25 to $50 at most retail banks.
Verify Wire Instructions by Phone
Real estate wire fraud is not a hypothetical risk. The FBI’s Internet Crime Complaint Center recorded over 9,300 real estate fraud complaints in 2024 with losses totaling roughly $174 million. The scam follows a predictable pattern: criminals intercept email threads between buyers, agents, and title companies, then send a convincing message with fraudulent wire instructions. By the time the buyer realizes the money went to a criminal’s account, it is often gone.
The defense is simple but non-negotiable: never wire money based on emailed instructions alone. Call the title company at a phone number you obtained independently, not one from the email, and verbally confirm the account number, routing number, and recipient name before authorizing the transfer. One phone call is the difference between closing on your home and losing six figures.
What a Late Payment Costs
Missing your closing date is not just inconvenient. Many purchase contracts include a per diem penalty, a daily fee the buyer pays the seller for every day closing runs past the contracted date. The amount is set in the contract and can be a flat daily rate or a percentage of the purchase price.
A delay can also blow up your mortgage rate lock. Most locks last 30 to 60 days, and if yours expires before closing, extending it typically costs 0.125% to 0.25% of the loan amount per 15-day extension. On a $400,000 loan, that is $500 to $1,000 per extension, and most lenders cap you at three. If the lock expires entirely and rates have climbed, you are stuck with whatever the market offers that day. A half-point rate increase on a $400,000 loan adds roughly $116 to your monthly payment for the life of a 30-year mortgage. These are avoidable costs that compound quickly when buyers aren’t ready to fund on time.