What is an Earnest Money Deposit?
By Diana Harvey, VanDyke Mortgage
The earnest money deposit is a portion of the down payment. Once you make an offer on a home, the earnest money proves to the seller that you are serious about purchasing their home. Without this token of commitment in place, you could essentially take multiple homes off the market by making multiple offers until you decide which one is best for you. Putting down an earnest money deposit prevents this.
How much money is put down as the Earnest Money Deposit?
This can vary on a few factors including the strength of the current real estate market, limitations in different states, and more, but the typical Earnest Money Deposit is usually somewhere between 1-2% of the purchase price. It is sometimes slightly higher in a hot market, and it could even be possible for the seller to accept your offer if you are able to put down a higher deposit as a sign that you are willing and able to purchase their home.
Is the Earnest Money Deposit refundable?
If the purchase falls through, a small cancellation fee is usually taken out of the Earnest Money Deposit but the remainder remains in escrow. Whoever is holding on to the deposit will determine if the money will be returned to you under the terms of the purchase agreement. Standard contracts typically allow for you to get your deposit back if financing falls through or problems are uncovered with the property during a home inspection.
Who holds the Earnest Money Deposit?
The Earnest Money Deposit is typically held by the title company. The money is then placed in an escrow account, and once the sale is finalized, the funds are released and applied to your total down payment.
Keep in mind that mortgage lenders need to source any deposits.
Advantages of using a local lender – Local Knowledge
Loan Originators who work for local mortgage companies have in-depth knowledge of the markets they work in and often have a pulse on market conditions and local real estate trends. Sellers may have more confidence seeing offers attached to a local company because they can move forward knowing these lenders have proven track records of stable real estate relationships.
Accessibility
When it comes to a process with multiple moving parts, working with a local lender may give you peace of mind knowing they are q quick phone call or drive away. Although technology has advanced many aspects of the mortgage process, sometimes it’s nice knowing you have the option to meet face-to-face to ask questions, or resolve any hurdles, in person.
Personalized Experience
There are a lot of mortgage programs available. A local lender will understand regional lending options and programs, and ultimately, help decide which loan program is right for you. They will work with you to find what best suites your needs.
Diana Harvey
Loan Originator, NMLS #1208474
Phone: (727) 458-2005
Branch Office: 13577 Feather Sound Drive, Sixth Floor, Clearwater, FL 33762
VanDyk Mortgage | Corp NMLS#3035 | 2449 Camelot Ct., SE, Grand Rapids, MI 49546
(888) 482-6395 | www.vandykmortgage.com | nmlsconsumeraccess.org
