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When closing on a home, you'll need to provide certified funds—in other words, a personal check won't do. Title companies and other closing agents usually accept wire transfers and cashier's checks, but the best option for you depends on your situation and the closing agent's guidelines.
Here's what you need to know about paying for closing costs and how to decide the best method for you.
How Do Wire Transfers Work During Closing?
Unlike a traditional Automated Clearing House (ACH) bank transfer, which must be verified by an interbank system before it's completed, a wire transfer is a direct electronic transfer of funds between two banks without a middleman.
A few days before you close, you'll receive a disclosure, which includes the amount you're required to pay at closing. You'll also receive wire instructions from the closing agent, which typically include the following information:
- The transfer amount
- Your account number
- The recipient's financial institution routing number
- The recipient's account number
- The recipient's contact information
Due to widespread wire fraud schemes, it's crucial that you confirm wire instructions directly with the closing agent, preferably in person or by contacting their main number. Be wary of any type of communication of changes to the process.
Depending on your bank or credit union, you may be able to submit the wire transfer request online, by phone or in person. You'll typically be charged a fee, often ranging from $15 to $30 for domestic transfers—though some institutions may not charge a fee at all. A wire transfer can be completed within a few hours, but experts recommend performing the transfer a day or two before closing to ensure that the funds have been received.
Pros and Cons of a Wire Transfer
There are both advantages and disadvantages of using a wire transfer instead of a cashier's check to pay your closing costs. Here's what to keep in mind.
- Fast: Because wire transfers don't involve an intermediary, they can often be completed within hours instead of days.
- Easy: In many cases, you can submit a wire transfer request online or over the phone, meaning you don't need to take time out of your day to visit a local branch, and you don't have to adhere to branch hours.
- Flexible: You can send a wire transfer to any recipient, both domestic and abroad. This feature can be especially beneficial if you can't be at the closing meeting in person.
- Can be expensive: Wire transfers usually cost more than cashier's checks, especially if you're sending money internationally, which can cost as much as $65.
- Irreversible: Once the recipient's bank accepts the transfer, you can't reverse the process. That's not a problem if you follow the wire instructions. But if you accidentally make a mistake or fall victim to a scam, it could cost you tens or even hundreds of thousands of dollars.
- Speed isn't guaranteed: In some cases, wire transfers may be delayed due to human error, bank cut-off times, insufficient funds and fraud prevention processes. Additionally, international wire transfers typically take a few days instead of a few hours.
How Do Cashier's Checks Work for Closing?
Unlike a personal check, which is drawn from your account, a cashier's check is drawn from your financial institution's funds and signed by a bank or credit union employee. As a result, cashier's checks are virtually guaranteed to clear.
Once you receive your closing disclosure with the amount you need to pay, check with your closing agent to see if you can pay with a cashier's check. Due to rising rates of check fraud, some may only allow you to use one for transactions under $10,000 or even less.
If you can use a cashier's check, make sure you have enough money in your bank account to cover it, then visit your local bank or credit union branch or submit a request for a check online. You'll typically need the following information:
- The check amount
- The name of the closing agent (check with them beforehand to get the correct information)
- Information for the account you want to draw the check from
- Any additional notes required by the closing agent
If you're getting a check in person, you may also need to show your government-issued photo ID to verify your identity. The bank will then draw the money from your account and issue the check, which you'll give to the closing agent directly.
If you're requesting a check online, you can provide the recipient's address or have it mailed to you. Depending on the time and date, you could get the check as soon as the next business day, or it may take longer. The financial institution may charge a fee between $10 and $20 for the transaction.
Once the closing agent receives the check, they'll deposit it, and their bank will verify the funds, which can take up to three days.
Pros and Cons of a Cashier's Check
As with wire transfers, cashier's checks come with benefits and drawbacks at closing. Here's what to consider.
- Lower cost: Cashier's checks tend to cost less than wire transfers, especially if you have an account that waives the standard fee.
- Secure: If you're concerned about the possibility of mixing up information on a wire transfer form or getting scammed, you can request and deliver a cashier's check entirely in person.
- Usually fast: If everything goes right, the check can go through as soon as the next business day.
- Options may be limited: Due to fraud concerns, some closing agents may only offer cashier's checks for smaller transactions or not at all.
- Greater potential for delays: If you request a check online, make sure to do so well before your closing date in case of a mail delay. Even after you give it to the closing agent, a check can be misplaced, and depending on the recipient's bank, verifying the check can take longer than a wire transfer.
- Less convenient: If your bank or credit union doesn't allow online requests, you'll be required to visit a local branch. This can be inconvenient if you're closing in another state and there are no branches nearby or if your schedule makes it difficult to get there during branch hours.
Should I Use a Wire Transfer or Cashier's Check?
Ultimately, the decision whether to use a wire transfer or a cashier's check to close on a home depends on your closing agent's rules and your preferences. If you can reasonably use both, consult with your real estate agent or attorney to determine which method is the right one for you.
With that said, a wire transfer is often the better choice because it often allows for greater transaction amounts and will be less likely to cause a delay in your closing process. It's also more convenient.
But if you prefer doing the process in person to avoid potential mistakes and have plenty of time to get your payment method set up, a cashier's check could be worth considering.
Review Your Credit Before and After Closing
Mortgage lenders will review your credit reports again shortly before closing on your loan, so it's important to monitor your credit throughout the mortgage process to ensure that there won't be any surprises.
Even after you complete the closing process, continue to keep tabs on your credit score to understand how the new loan and other actions impact it. While you've accomplished your goal of buying a home, it's critical that you continue to maintain good credit habits.