Required Cash

AAA

DEFINITION of 'Required Cash'

The total dollar amount that must be posted up front by the buyer to close a mortgage or to refinance an existing property. The required cash amount can include any of the following amounts if they are requested at closing:

-Any down payment
-Points or other fixed charges to the lender
-Insurance premiums
-Title insurance or per diem interest

The required cash should be expressed on the Good Faith Estimate of Settlement, which is a mandatory step in the lending process.

INVESTOPEDIA EXPLAINS 'Required Cash'

While taking out a mortgage used to require a 10-20% cash down payment, newer types of mortgages along with an easy credit environment relaxed standards to the point where many people were able to borrow large amounts with no down payment. That cost didn't just vanish, however, it was simply added to the principal due on the mortgage, leading to higher interest costs over the life of the loan. "No down payment" and "interest only" mortgages were one of the hallmarks of the subprime lending boom during 2004-2006, but many of these borrowers will end up having their homes foreclosed as a result of rising interest rates and lack of equity buildup.

RELATED TERMS
  1. Minimum Down Payment

    The minimum cash contribution that must be made by a borrower ...
  2. Origination

    The process of creating a home loan or mortgage. During the origination ...
  3. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  4. Subprime Lender

    A type of lender that specializes in lending to borrowers with ...
  5. Interest-Only ARM

    An adjustable-rate mortgage (ARM) with an initial interest-only ...
  6. No-Fee Mortgage

    A mortgage in which a mortgagee does not charge the mortgagor ...
Related Articles
  1. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  2. Wheels Of A Future Fortune
    Home & Auto

    Wheels Of A Future Fortune

  3. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  4. 10 Steps For First-Time Home Buyers
    Home & Auto

    10 Steps For First-Time Home Buyers

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center