Prepared by Pillar Private Lending
Investor Resources
Cash to close is more than a down payment
Cash to close is the net amount the borrower must deliver for settlement after accounting for the purchase price, loan proceeds, deposits, credits, payoff items, fees, prepaids, escrows, and other transaction charges.
Required reserves are usually verified liquidity retained after closing rather than money paid to the seller, although funded reserve or escrow accounts can affect settlement cash. Confirm how the selected program treats each item.
Start with required equity
For a purchase, equity is the portion of acquisition cost not covered by financing or eligible credits. For a refinance, the relevant calculation begins with new proceeds and subtracts existing liens, transaction costs, and any required paydowns.
Do not infer proceeds from a generic leverage percentage. Value, purchase price, rent coverage, property type, borrower profile, transaction purpose, and program rules can all affect sizing.
Add lender and third-party fees
Potential charges include origination, underwriting or processing where applicable, appraisal, credit, legal or document costs, title, escrow or settlement, recording, survey, entity, and other transaction-specific items.
Ask which fees are estimates, which are fixed, which can be financed, and which must be paid before closing. Avoid counting financed fees as though they disappear; they increase debt or reduce net proceeds.
Include prepaid items and escrows
Prepaid interest, initial insurance premiums, tax payments, and escrow deposits can create substantial cash needs even though they are not all lender fees. Timing within the month and local tax schedules can affect the amount.
Insurance, tax, and association figures can change during underwriting. Update the estimate when the closing statement or settlement figures become available.
Distinguish reserves from settlement cash
Programs may require verified post-closing liquidity measured by months of a defined payment, a dollar amount, or another method. Eligible account types, ownership, sourcing, and documentation vary.
A reserve requirement protects against operating disruption but does not replace working capital for repairs, vacancy, turnover, or improvements. Avoid committing the same dollars to both closing and post-closing reserves.
Build a cash-to-close worksheet
Use proposal and settlement figures rather than a universal percentage. This educational worksheet does not represent Pillar requirements.
| Cash use or source | Planning treatment |
|---|---|
| Purchase price or payoff | Starting transaction obligation |
| Loan proceeds | Subtract funds available at closing |
| Earnest money and verified credits | Subtract when applicable and accepted |
| Lender and third-party fees | Add borrower-paid amounts |
| Prepaids and funded escrows | Add current settlement estimate |
| Repairs or other closing conditions | Add if paid or escrowed at close |
| Post-closing reserves | Track separately unless actually funded at settlement |
Worked example
Illustrative purchase arithmetic
- 1Purchase price: $400,000
- 2Illustrative loan proceeds: −$300,000
- 3Earnest-money deposit already credited: −$10,000
- 4Illustrative fees, prepaids, and escrows: +$14,500
Illustrative settlement cash is $104,500, before any separate post-closing reserve requirement. These figures do not indicate available DSCR terms.
Plan funds verification and wire timing
Document the source of funds early. Transfers between accounts, liquidation of investments, gifts if permitted, entity contributions, and sale proceeds can require additional records or timing.
Confirm the final wire amount and instructions through a trusted, independently verified channel. Bank cutoffs, holds, title conditions, and last-minute statement changes can affect timing; follow settlement and bank procedures and remain alert to wire fraud.
Reconcile the final program and closing statement
Equity, credits, reserves, fees, escrows, and eligible funding sources vary by program and transaction. Recalculate after appraisal, insurance, title, loan sizing, and settlement figures are final.
The DSCR calculator helps estimate payment coverage and monthly cash flow. It does not replace a loan estimate, closing disclosure where applicable, settlement statement, reserve analysis, or transaction-specific instructions.
This guide is educational and is not individualized financial, legal, tax, or investment advice. Exact requirements and terms vary by lender, property, borrower, and transaction.
Discuss the actual transaction
Move from research to a deal-specific review
Educational examples are useful for planning. Actual eligibility, structure, and terms depend on the property, borrower, lender, and transaction.