Prepping to buy your dream home? One thing you'll want to prepare for is to provide your "earnest money." Is this different from your down payment? That's what we're breaking down in this article. Read on to learn more.
Let's start with earnest money.
When you make an offer, and it gets accepted, earnest money is a deposit you put into an escrow account. It's a way to demonstrate your commitment to buying the property. Typically, earnest money ranges from 1% to 3% of the sale price, but it can be higher in competitive markets.
On the other hand, a down payment is the portion of the total purchase price you pay at closing, especially if you're using a mortgage loan to finance your home. The amount of your down payment depends on factors like your comfort level and your lender's requirements. It usually falls between 3% and 20% of the purchase price.
When it's time to close on your new home, all the funds will be distributed accordingly.
Your earnest money will be applied towards your down payment and disbursed to your lender through the title or closing agent.
Since earnest money is typically a smaller percentage, you'll likely need to contribute more towards your down payment at closing. These closing cost fees are associated with finalizing the sale and will be added to the final sale price.
If there's a contingency in your purchase and sale agreement, such as a home inspection, appraisal, or financing contingency, your earnest money is usually refundable to you, the buyer.
However, you may risk losing your earnest money to the seller if you decide to back out without a valid contingency. On the flip side, if the seller cancels the deal, your earnest money will be refunded to you in the same form it was received.
To make sure you protect your earnest money, it's wise to include contingencies in your agreement. These safeguards give you peace of mind and allow you to keep your deposit should any issues arise during the process.
As you prepare for this exciting milestone, our online calculator can help you estimate a comfortable mortgage payment based on different loan details. It's essential to feel financially prepared when you're ready to buy a home.
Understanding earnest money and down payment is key to demonstrating commitment and protecting your interests throughout the home-buying journey. With this knowledge, you can confidently move forward and turn your dream of homeownership into a reality.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 2498283
1721 South Ave W.
Missoula, Montana 59801
Phone: (406) 721-0331
Fax: (406) 251-3539
Missoula Mortgage strives to ensure that its services are accessible to people with disabilities. Missoula Mortgage has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
Missoula Mortgage makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows missoulamortgage.net to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
Missoula Mortgage accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
Missoula Mortgage continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on Missoula Mortgage website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on Missoula Mortgage website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: firstname.lastname@example.org