A homebuyer may need cash for earnest money, inspections, an appraisal, closing costs, prepaid taxes and insurance, moving expenses, immediate repairs and an emergency reserve. Some payments become part of the final cash-to-close calculation, while others are paid separately. Your lender’s Loan Estimate provides the most useful transaction-specific estimate.
The Down Payment Is Only One Part of Your Home-Buying Budget
When buyers begin saving for a home, the down payment usually receives the most attention. It is important, but it does not represent every dollar that may be needed.
A complete home-buying budget should consider three periods:
Expenses paid before closing
Funds required at closing
Expenses that begin after receiving the keys
The amount will vary based on the home, mortgage program, purchase contract, property taxes, homeowners insurance, inspections, closing date and negotiated credits.
Buyers can review our Illinois home-buying timeline to see when the major financial steps generally occur.
What Is the Difference Between a Down Payment and Cash to Close?
The down payment is the portion of the purchase price that the buyer is not financing through the mortgage.
Cash to close is the amount the buyer must provide at closing after accounting for:
The down payment
Loan and settlement charges
Prepaid expenses
Initial escrow deposits
Earnest money already paid
Seller or lender credits
Property-tax and other prorations
Transaction-specific adjustments
The Consumer Financial Protection Bureau explains that the Estimated Cash to Close appears on the Loan Estimate. It includes the down payment and closing costs, minus deposits, seller credits and other applicable adjustments.
Despite the phrase “cash to close,” buyers generally do not bring physical currency to closing. The closing provider will explain the approved payment method, which may involve a wire transfer or cashier’s check.
What Expenses Might You Pay Before Closing?
Some home-buying expenses may be due before the closing date. They can reduce the amount remaining in your bank account even when they do not appear as a separate charge in your final cash-to-close figure.
Earnest Money
Earnest money is a deposit submitted according to the purchase contract. It demonstrates the buyer’s commitment to the transaction.
The amount and timing are negotiable and depend on the contract. When properly deposited and applied to the purchase, earnest money is generally credited in the final transaction. It is not normally an additional payment on top of the purchase price, but the buyer needs those funds available earlier in the process.
Buyers should confirm that their earnest money appears as a credit on the final closing documents.
Home Inspection and Specialized Testing
A general home inspection is typically paid for when the inspection is performed. Depending on the property, a buyer may also consider or require:
Radon testing
Sewer scope inspection
Well or water testing
Septic inspection
Chimney inspection
Structural evaluation
Pest inspection
Mold or environmental evaluation
These services are not automatically included in every purchase. Their relevance depends on the home, contract and buyer’s concerns.
Our guide explaining what to expect from a home inspection can help buyers prepare for this part of the transaction.
Appraisal
A mortgage lender may require an appraisal to evaluate the property in connection with the proposed loan. The appraisal is not a substitute for a home inspection.
Depending on the lender, the appraisal fee may be collected before closing or included in the closing-cost calculation. Buyers should ask when payment is due and whether the amount already appears on the Loan Estimate.
Homeowners Insurance
A mortgage lender generally requires proof of homeowners insurance before closing. The CFPB notes that buyers usually pay the first 6 to 12 months of homeowners insurance premiums at or before closing.
The precise amount depends on the property, coverage, insurer, deductibles and applicable risks. Buyers should obtain insurance information early enough to identify affordability or coverage concerns before closing.
What Closing Costs Are Paid in Addition to the Down Payment?
Closing costs are charges associated with obtaining the mortgage, completing the transaction and transferring ownership. Depending on the purchase, they may include:
Loan origination and underwriting charges
Credit-report and verification charges
Appraisal-related fees
Title search and title insurance
Attorney or settlement services
Government recording charges
Mortgage discount points
Loan-program-specific fees
Prepaid mortgage interest
Initial property-tax escrow deposits
Initial insurance escrow deposits
Association-related charges
Not every buyer will pay every item. Costs vary among lenders, loan programs, properties and locations.
For a deeper review, read our complete guide to buyer closing costs in Illinois and Wisconsin.
Why Is It Risky to Estimate Everything With One Percentage?
Buyers often ask for one percentage that will predict the money needed beyond the down payment. Broad estimates can be useful at the very beginning, but no percentage will be accurate for every purchase.
Some expenses are related to the loan amount or purchase price. Others are affected by:
Property-tax amounts
Homeowners insurance premiums
The closing date
The lender’s fee structure
Mortgage points or lender credits
Title and settlement arrangements
Attorney involvement
Association requirements
The property’s utilities and systems
Negotiated seller credits
Two homes with the same purchase price can produce different cash requirements. A home with higher property taxes, different insurance needs or an association contribution may require more upfront money than another similarly priced property.
The Loan Estimate is therefore more useful than a general online calculator once the buyer has applied for a specific mortgage.
Can Seller or Lender Credits Reduce the Cash Needed?
A seller may agree to provide a credit toward eligible buyer expenses. The credit must be negotiated, documented and permitted by the buyer’s mortgage program.
A lender credit may also reduce the amount due upfront. However, the CFPB advises buyers to determine whether the credit is connected to a higher interest rate. Reducing cash needed today can increase the long-term cost of the mortgage.
Credits are not unrestricted cash for the buyer. Mortgage guidelines determine which expenses can be covered and what happens if a credit exceeds the eligible costs.
Before writing an offer that requests a seller credit, buyers should ask their lender to confirm:
Whether the requested credit is permitted
Which expenses it may cover
Whether there are program limits
How the credit affects the offer
What happens if the final eligible costs are lower than expected
How Do Loan Programs Affect the Cash You Need?
Different mortgage programs have different down payment requirements, mortgage insurance structures, funding fees and rules governing credits.
For example, the U.S. Department of Veterans Affairs states that many VA borrowers pay a funding fee unless an exemption applies. The funding fee may generally be financed into the loan or paid at closing. Other VA purchase-loan fees and charges generally must be paid at closing rather than financed.
FHA, USDA and conventional loans use different rules. Buyers should obtain program-specific information directly from a qualified mortgage professional instead of assuming that a low-down-payment program eliminates other upfront costs.
What Should You Keep Available After Closing?
The amount needed to complete the transaction is not necessarily the amount a buyer should have saved.
Homeownership expenses can begin immediately. Buyers may need money for:
Moving and storage
Utility deposits or account setup
Locks and security
Window coverings
Appliances or furnishings
Lawn and snow equipment
Immediate maintenance
Insurance deductibles
Association payments
Unexpected repairs
There is no universal emergency-fund amount that fits every buyer. The appropriate reserve depends on the buyer’s income, monthly obligations, property condition, insurance deductibles and comfort level.
Before applying every available dollar to the down payment, discuss the complete budget with the lender and consider what funds should remain accessible after closing.
What Is Different in Northern Illinois and Southern Wisconsin?
The major expense categories are similar, but the transaction process can differ across the state line.
Northern Illinois transactions commonly involve buyer and seller attorneys, title professionals, lenders and county or municipal procedures. Property-tax prorations, local transfer requirements and municipal requirements can affect the final figures.
Southern Wisconsin transactions are commonly coordinated through real estate professionals, lenders and title companies. Wisconsin properties may also involve well, septic, condominium, shoreland or other property-specific considerations.
Buyers purchasing in Kenosha County can review our Wisconsin home-buying timeline.
Whether the home is in Lake County, McHenry County, Kenosha County or another nearby area, buyers should obtain property-specific information rather than relying on a generic national estimate.
A Practical Way to Organize Your Savings
Divide your available funds into four categories:
Down payment funds
Pre-closing expenses, including earnest money and inspections
Estimated cash to close
Post-closing and emergency reserves
Ask the lender whether every anticipated expense is reflected in the Loan Estimate. Track expenses already paid so they are not accidentally counted twice.
Avoid making large purchases, opening new credit accounts or moving money without consulting the lender during the mortgage process. Documentation requirements can apply to the source and movement of funds.
Reviewing first-time homebuyer mistakes to avoid can help buyers recognize other financial and procedural issues before they become problems.
The Star Home Team’s Perspective
We encourage buyers to begin with a complete financial picture, not simply a target down payment.
A knowledgeable lender can estimate the financing and cash-to-close requirements. A real estate professional can help identify contract deadlines, inspection considerations, likely property-specific expenses and questions that should be directed to the lender, attorney, title company or insurance professional.
Our role at The Star Home Team is to help buyers stay organized, understand the process and communicate with the appropriate professionals from the first conversation through closing.
Frequently Asked Questions
How much money do I need besides the down payment?
The amount depends on the loan, lender, property and contract. Buyers may need funds for earnest money, inspections, an appraisal, closing expenses, prepaid interest, homeowners insurance, escrow deposits, moving and post-closing reserves. Ask your lender for a transaction-specific Loan Estimate.
Is earnest money extra money on top of the purchase price?
Earnest money is generally applied as a credit in the transaction when it has been properly deposited and the purchase closes. However, the buyer must have the money available earlier, according to the deadlines in the purchase contract.
Are closing costs included in the down payment?
No. The down payment is applied toward the purchase price. Closing costs pay for financing, title, settlement, recording, prepaid expenses and other transaction requirements. Both contribute to the buyer’s final cash-to-close calculation.
What is the difference between closing costs and cash to close?
Closing costs are the expenses associated with the mortgage and property transfer. Cash to close is the final amount the buyer must provide after the down payment, closing costs, prepaid expenses, deposits, credits and adjustments have been calculated.
Can the seller pay all of my closing costs?
A seller may agree to pay eligible expenses, but the credit must be negotiated and permitted by the mortgage program. Limits and eligible uses vary. The buyer’s lender should confirm the allowable amount before the offer is submitted.
When will I know the final amount needed for closing?
The Loan Estimate provides an early estimate. For most covered mortgage transactions, the lender must provide the Closing Disclosure at least three business days before closing. Buyers should compare both forms and ask about unexpected differences.
Should I use all my savings for a larger down payment?
That decision depends on the mortgage, monthly payment, available savings and personal circumstances. Buyers should account for closing expenses and retain an appropriate reserve for moving, maintenance and unexpected homeownership costs. Discuss the options with a qualified lender or financial professional.
Do cash buyers have expenses beyond the purchase price?
Yes. A cash buyer may still pay for inspections, title services, legal or settlement services, recording, homeowners insurance, association charges and other property-specific expenses, even without mortgage-origination costs.
Conclusion
The down payment is only one part of the money needed to buy a home. A well-prepared buyer also considers pre-closing expenses, closing costs, prepaid taxes and insurance, moving expenses and an appropriate reserve for homeownership.
The exact amount cannot be determined from the purchase price alone. Begin with mortgage pre-approval, review the Loan Estimate carefully and update the budget as the property, insurance, taxes and transaction details become known.
This article provides general real estate information and is not legal, tax, lending, insurance or financial advice. Consult the appropriate licensed professionals about your specific purchase.
Sources
Consumer Financial Protection Bureau. “Loan Estimate Explainer.” Accessed September 3, 2026.
https://www.consumerfinance.gov/owning-a-home/loan-estimate/Consumer Financial Protection Bureau. “Your Home Loan Toolkit.” Updated 2026.
https://files-prod.consumerfinance.gov/f/documents/cfpb_your-home-loan-toolkit.pdfConsumer Financial Protection Bureau. “When Do I Get a Closing Disclosure?”
https://www.consumerfinance.gov/ask-cfpb/when-do-i-get-a-closing-disclosure-en-179/U.S. Department of Veterans Affairs. “VA Funding Fee and Loan Closing Costs.” Updated January 15, 2026.
https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
About the Author
Susan Starwalt is the Broker Owner of Better Homes and Gardens Real Estate Star Homes and The Star Home Team, serving Northern Illinois and Southern Wisconsin. Licensed since 1998, Susan works alongside Jim Starwalt and the company's management team to support one of the region's top-producing real estate organizations.
The Star Home Team has helped more than 4,000 families buy and sell homes and is recognized as one of Illinois' leading real estate teams. The team serves buyers and sellers throughout Lake County, McHenry County, Kenosha County, and surrounding communities, providing expert guidance, local market knowledge, innovative marketing, and personalized service.
Ready to Take the Next Step?
Whether you're buying your first home, selling your current property, relocating, or simply exploring your options, The Star Home Team is here to help.
Learn more about buying and selling real estate in Northern Illinois and Southern Wisconsin by visiting our Real Estate Resource Center.
Fill out our Contact Us form online to tell us about your real estate goals or send us a message anytime.
The Star Home Team proudly serves buyers and sellers throughout Northern Illinois and Southern Wisconsin.
Licensed in Illinois and Wisconsin.
