Every term sheet we send carries a line labeled Est. Cash to Close (incl. down payment). On a $150,000 purchase with a $40,000 renovation, on our most common terms, that line is $21,245 plus interest from your closing day to the end of that month.
That line is our side of the check. The title company adds its own charges, and Virginia adds its recordation taxes. Below is each line we charge, how it is figured and what moves it, then what the title company adds, so you can put the whole number together before closing week.
How We Figure the Line
The cash-to-close line on our term sheet has four pieces:
- The down payment. The part of the purchase price we do not lend.
- Points. Charged on the full loan amount, including the renovation money we hold back for draws.
- The document fee. A flat $995.
- Interest from the closing date through the end of that month. Also figured on the full loan amount. We charge interest on the full commitment from day one, and our article on Dutch interest walks through how that works.
We take the points and the fee out of our wire at closing. That is why they show up on the settlement statement, and why the cash you bring to closing covers them.
There is no appraisal fee in any of it. We do not order appraisals. We value the house ourselves.
The Example, Line by Line
A $150,000 purchase with a $40,000 renovation, on our most common terms:
- 90% of the price at closing: $135,000
- 100% of the renovation, held back for draws: $40,000
- A $175,000 loan on our Standard six-month term
The cash-to-close line for that loan:
- Down payment: $15,000
- Points, three on the full $175,000: $5,250
- Document fee: $995
- Interest from closing day through month-end: set by your closing date
That comes to $21,245 plus the interest line. Two of those lines use the full $175,000. The $40,000 for the renovation stays with us until you draw it, and the points and the interest line both include it from closing day.
How the Closing Date Moves the Interest Line
The interest line runs from your closing day through the last day of that month. Close on the 25th and it is a few days. Close on the 2nd and it is most of a month.
The down payment, the points and the fee stay the same whatever the date. The term sheet figures the interest line from your expected closing date, so if that date moves, the line moves with it.
How the Term and Financing Change the Check
Points depend on the term you choose. Our menu has three:
- Sprint: three months, 1 point
- Standard: six months, 3 points
- Stretch: nine months, 5 points
On the same $175,000 loan, the points line is $1,750 on Sprint, $5,250 on Standard and $8,750 on Stretch. The term you pick changes your cash to close.
The financing level moves it too. We lend 95%, 90% or 80% of the purchase price, depending on the operator and the deal, and 90% is the most common. That sets the down payment and the loan amount the points are figured on. The renovation side works the same on every term: up to 100% of the budget, paid in draws. Every term also carries two 90-day extensions at 2 points each, and there is no prepayment penalty.
Our menu points heavy rehabs and BRRRR projects with a refinance exit to Stretch. If you plan to rent the house and refinance,the refinance side of the same deal has its own timing rules, and the Lynchburg case study follows a BRRRR loan we made.
What the Title Company Collects
The title or settlement company charges and collects the next three costs, so they are not on our term sheet. They show up on the settlement statement, and your check covers them too.
Virginia's recordation taxes. The buyer pays the state recordation tax twice, once on the deed and once on the deed of trust:
- On the deed: 25 cents per $100, figured on the price or the property's most recent tax assessment, whichever is greater (Code of Virginia § 58.1-801).
- On the deed of trust: 25 cents per $100 of the loan amount (§ 58.1-803).
Your city or county may add its own recordation tax equal to one-third of the state tax (§ 58.1-814). In the example, with the local third, and with an assessment no higher than the price:
- Deed: $375 state plus $125 local, $500
- Deed of trust: $437.50 state plus $145.83 local, $583.33
That is about $1,083 together. The deed of trust tax is figured on the full $175,000, so the renovation money counts there as well.
The seller pays a separate grantor tax (§ 58.1-802), unless the contract moves some or all of it to the buyer. Check that paragraph of your contract.
The clerk's recording fees. The clerk charges its own fees to record the deed and the deed of trust.
Title insurance and the settlement fee. We require a lender's title policy. An owner's policy is your choice. The settlement company also charges a fee for running the closing. Premiums and fees vary, so get the title company's estimate. Our title insurance article covers how to read the commitment and the reasons to buy the owner's policy.
Insurance, Paid for the Term Before Closing
One more cost is not on our term sheet. Before closing, you need an insurance policy that names us as mortgagee, paid in full for the term of the loan. Count that premium in your closing cash. On a renovation, the type of policy matters. Our article on builder's risk insurance covers the right kind.
Knowing the Whole Check Before Closing Week
The week you sign the contract, ask the title company for a written estimate of everything it will collect: the recordation taxes, the clerk's fees, the title premiums and its settlement fee. Line up the insurance the same week, since the policy has to be paid for the full term before closing.
If you have a house under contract, call us at 804-208-0465 or use the Discuss My Deal form, and your term sheet will carry this line for your deal.
Add the title company's estimate and the insurance premium to the cash-to-close line on our term sheet. With those three numbers in hand, you know the whole check before closing week.
Sources
- Code of Virginia § 58.1-801, Deeds generally. law.lis.virginia.gov
- Code of Virginia § 58.1-802, Additional tax paid by grantor. law.lis.virginia.gov
- Code of Virginia § 58.1-803, Deeds of trust or mortgages. law.lis.virginia.gov
- Code of Virginia § 58.1-814, City or county recordation tax. law.lis.virginia.gov