Required Cash

Required cash refers to the amount of money needed by a home buyer or borrower to complete a property transaction while taking into account the financing.

Cash is required by the buyer as lenders seldom finance 100% of a real estate purchase at any price.

And even if a buyer manages to find a mortgage that loans 100% of the funds required via a sub-prime loan, it will come with very unfavorable terms in the form of high interest rates and points.

This is why buyers often know instinctively that they need to have money in the bank to buy a house… or face the consequences of high financing costs.

And many choose not to buy when they have insufficient cash.

The required cash is used to pay for down payment, fees, points, per diem interest, and other expense items for loan closing.

All these details should be shown on the loan estimate form, disclosure form, and good faith estimate.

The general advice is that if you don’t have enough cash to buy the home you desire, the wisdom is to buy a smaller house or wait until you are financially stronger before committing to a home purchase.

Cash requirements are not exclusive to property purchases. Refinancing might require cash as well.