If you’re either taking out a mortgage or refinancing a property in Tennessee, it’s necessary to learn some of the ins and outs of the process. Without a firm grasp of how it all works, it’s easy to make a miscalculation or get into difficulties.
One of the most important concepts is that of required cash. When taking out a mortgage or refinancing, you as a buyer must provide a certain amount of money at the beginning of the transaction. Without the required cash at real estate closings, it’s generally not possible to secure a loan or refinance.
Why is required cash needed?
Required cash breaks down into multiple subcategories, each of which represents a part of the closing process.
The first and most familiar is probably the down payment. A down payment is a sum of money paid by the buyer up front, usually expressed as a percentage of the total loan. Some mortgages don’t require a down payment, but that’s rare.
Next, a buyer is responsible for several fees and payments associated with the property’s ownership transfer. These are also a part of the “required cash” grouping. Depending on the transaction, a buyer may also need to pay property taxes up to a certain point.
Finally, some buyers “buy points” on their mortgage, paying extra money upfront to lower the loan’s interest payments.
What does required cash mean for you?
If you’re contemplating a real estate purchase, you must be 100% confident that you can gather the required cash.
Keep in mind that this goes beyond just the down payment amount. If you can make a down payment but struggle to cover the associated fees and payments, you may need to choose a less expensive property or delay buying a home.
Make sure to exhaustively calculate the entire group of costs that makes up required cash before moving forward with any real estate transaction.
Required cash represents the money you’ll need to complete most real estate transactions. As such, having a good understanding of your finances is critical.