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5 Way to Fund Closing Costs

young couple shaking hand with business personClosing costs can include things like a mortgage loan down payment, appraisal fees, an origination fee and/or processing fees. These are the funds you as the home buyer will need at the closing table. Cash-to-close fees may also be paid at the time of closing, and would include things like homeowners insurance and property taxes, also called your escrow account.

Sometimes your closing costs when buying a home can run up into the couple-thousand-dollar range (or more). Many first time home buyers want to know how to come up with these closing costs. Many folks will say, "You have to have the cash on-hand," not realizing you actually have more than one option for funding closing costs!

Here's a look at closing costs and where the money can come from:

  1. The mortgage itself. Some closing costs can be rolled into the home mortgage loan.
  2. Savings account. Whatever money you have saved up can pay for closing costs or any cash-to-close funds. Be sure to document where the money is from so your lender knows you can pay your mortgage payment.
  3. Gifts. Some cash-to-close funds may come from family (grandparents are a common source for first time home buyers), significant others, an employer or even a municipality like the city where the home is located.
  4. Assistance. Some programs from the government or non-profit organizations can help pay for things like down payment in certain mortgage programs.
  5. Secured Loan. If you own your car free-and-clear, you can actually use that as collateral to pay for closing costs in some situations.

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