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Understanding Payment Methods for Closing Costs: Wire Transfers vs. Cashier’s Checks

When closing on a home, providing certified funds is essential—personal checks won’t suffice. Title companies and other closing agents typically accept wire transfers and cashier’s checks. 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 traditional Automated Clearing House (ACH) bank transfers, which must be verified by an interbank system, a wire transfer is a direct electronic transfer of funds between two banks without a middleman. A few days before closing, you’ll receive a disclosure with the amount required at closing and wire instructions from the closing agent. These instructions typically include:

• 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, confirm wire instructions directly with the closing agent, preferably in person or by contacting their main number. Depending on your bank or credit union, you may be able to submit the wire transfer request online, by phone, or in person. Fees typically range from $15 to $30 for domestic transfers. A wire transfer can be completed within a few hours, but experts recommend performing the transfer a day or two before closing to ensure the funds are received.

Pros and Cons of a Wire Transfer

There are both advantages and disadvantages to using a wire transfer instead of a cashier’s check to pay your closing costs. Here’s what to keep in mind:

Pros

• Fast: Wire transfers can often be completed within hours instead of days.
• Easy: You can submit a wire transfer request online or over the phone, saving you a trip to the bank.
• Flexible: Wire transfers can be sent to any recipient, both domestic and abroad.

Cons

• Can be expensive: Wire transfers usually cost more than cashier’s checks, especially for international transfers.
• Irreversible: Once the recipient’s bank accepts the transfer, it can’t be reversed.
• Speed isn’t guaranteed: Wire transfers may be delayed due to various factors.

How Do Cashier’s Checks Work for Closing?

Unlike a personal check, a cashier’s check is drawn from your financial institution’s funds and signed by a bank or credit union employee, making it 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 use a cashier’s check. Due to rising rates of check fraud, some may only allow cashier’s checks for transactions under $10,000 or even less.

If you can use a cashier’s check, ensure 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
• 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 need to show your government-issued photo ID. 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. 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:

Pros

• Lower cost: Cashier’s checks tend to cost less than wire transfers.
• Secure: You can request and deliver a cashier’s check entirely in person.
• Usually fast: The check can go through as soon as the next business day.

Cons

• Options may be limited: Some closing agents may only offer cashier’s checks for smaller transactions.
• Greater potential for delays: Mail delays and bank verification processes can slow down the transaction.
• Less convenient: You may need to visit a local branch, which can be inconvenient if you’re closing in another state.

Should I Use a Wire Transfer or Cashier’s Check?

The decision 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 both options are available, consult with your real estate agent or attorney to determine which method is right for you. Generally, a wire transfer is often the better choice because it allows for greater transaction amounts and is less likely to cause a delay in your closing process. However, 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 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 to maintain good credit habits.

For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you navigate the home buying process with confidence and ease.

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