🧾 Mortgage Assets 101: Cash to Close, Reserves & Deposits

What we look for—and why it matters!

💬 What You Need to Know

When applying for a mortgage, many people have questions about what assets are required and how they affect the process—especially when it comes to things like cash to close, reserves, and large deposits. To make sure you're fully prepared, it's important to know some key do’s and don’ts in mortgage lending.

Do’s:

• Do keep your financial documents organized

• Do communicate any large deposits or transfers in advance

• Do ask your lender questions if you’re unsure about anything

Don’ts:

• Don’t make large, unexplained deposits into your account

• Don’t open new credit accounts during the mortgage process

• Don’t take on new debt or make big purchases

This week, we’re diving into assets and breaking down how they impact your loan—let’s start with the essentials, so you can feel more confident moving forward.

💰 Cash to Close

Cash to close is the total amount you’ll need at the closing table. It usually includes:

• Down payment (your contribution toward the home price)

• Closing costs (lender fees, title, recording, taxes, insurance, etc.)

• Prepaid expenses (property taxes, homeowners insurance, interest)

• Minus any credits (from the seller, lender, or agents)

• Minus any Earnest Money Deposit (EMD) you've already paid

💵 What’s an Earnest Money Deposit?

An Earnest Money Deposit (EMD) is a good-faith deposit made when your purchase offer is accepted. It shows the seller you’re serious about buying the home.

• Typically 1–3% of the purchase price

• Held in escrow until closing

• Credited toward your down payment or closing costs

It’s not extra money—you’re just paying part of your total funds earlier in the process. At closing, it gets subtracted from your cash to close.

🔎 Real-Life Example (Arizona Buyers)

Let’s say you’re buying a $400,000 home with 5% down.

• Down payment: $20,000

• Estimated closing costs in AZ: $10,000–$15,000

• Seller credit: $2,000

• Earnest money deposit (1%): $4,000

Total cash to close = $30,000–$35,000
Minus your $4,000 EMD → You'll bring about $26,000–$31,000 to the closing table.

🛏️ Reserves

Reserves are extra funds you have left over after you close. Think of them as a safety net to show the lender you’re financially stable beyond day one.

Some loan types—like investment properties, second homes, or jumbo loans—require reserves. These are calculated in months of total mortgage payments (including principal, interest, taxes, and insurance).

Even if reserves aren’t required for your loan type, showing that you have extra funds can open up more approval opportunities. Having reserves may help you qualify for a larger loan or more favorable terms, as it gives the lender confidence that you have something to fall back on in case of unexpected expenses.

Real-life example:
If your mortgage payment is $2,000/month and your loan requires 2 months' reserves, you’ll need an additional $4,000 in verified funds after your cash to close.

💸 Large Deposits

Here’s the part that can trip people up—any large, unusual deposit must be sourced. That means we need to verify:

• Where it came from

• That it’s not a loan

• That it’s from an acceptable source (like a gift, sale, or bonus)

Why? Because federal regulations require lenders to ensure your funds aren’t coming from untraceable or illegal sources.

Real-life examples:

1. Selling a car: You sell your car for $6,000 and deposit the check. We’ll need a copy of the bill of sale and proof that the transaction was legitimate. Without this, that money may not count toward your cash to close.

2. Inheriting money: You inherit $10,000 from a relative and deposit it. We’ll need the will or legal documentation showing it was an inheritance to prove the funds are valid and not a hidden loan.

👀 Why We Source Everything

We get it—it can feel like a lot. Providing every bank statement, documenting Venmo transactions, and explaining deposits from Grandma might seem excessive.

But we’re not just being nosy—it’s the law.
Thanks to the Patriot Act, lenders must comply with anti-money laundering rules, ensuring every dollar used to buy a home is accounted for and legally sourced.

It protects you, the lender, and the financial system as a whole.

✅ Pro Tips to Stay Ahead

• Keep funds in one account at least 60 days before applying

• Avoid unnecessary transfers or large cash deposits

• Save documentation for gifts, bonuses, or sold items

• Let your lender know in advance about big transactions

• Ask questions—before you move money

🏡 Final Thought

Yes, tracking and sourcing funds can feel tedious—but when you understand why it’s required, it makes the process smoother. I'm here to help you navigate every step and keep surprises to a minimum.

So whether you’re gathering statements, explaining a deposit, or prepping your EMD—just know I’ve got your back.

Ready to make your homebuying journey smoother? ✨ Reach out to me today with any questions, or let’s discuss how I can help you navigate the process and ensure you’re fully prepared every step of the way.