So, you’ve found the home of your dreams and are ready to submit the purchase offer. Your agent asks you for an Earnest Money Deposit for an amount that will make your offer both solid and enticing for the seller. What exactly is an Earnest Money Deposit? An Earnest Money Deposit, otherwise known as an EMD, is a money deposit agreed to in the purchase contract that lets sellers and their agents know the buyers are serious about purchasing the home and intend to see the transaction through to closing. Once the offer is accepted, the funds are deposited with and held by escrow until the sale closes. Because the EMD is considered a security deposit, a timeline set forth in the purchase contract must be adhered to so that the buyers do not risk losing their EMD in the event an issue arises during their investigation period that cannot be resolved and the buyers wish to cancel the transaction.
The funds from the EMD will ultimately go toward the down payment. So for instance if the buyers are purchasing a home for $400,000 and are putting 5% down, the total down payment would be $20,000. If the EMD submitted is $5,000, the buyers will just need to come in with the remaining $15,000 to make up the 5% down payment by the close of escrow. Keep in mind, the down payment is separate from the tax and insurance reserve requirements and closing costs which include title, escrow, and lender fees. Contact Team Souther today for more details regarding reserve requirements and closing costs as the amount will vary based on a number of factors. We are happy to review your financial documents to help you choose a home loan that is right for you.
© 2017 Marilyn Quindo