With all of the terminology that gets thrown around during the mortgage purchase process, it can be very confusing. Luckily, the Home Loan Expert team is here and loves to explain mortgage terms and inform people about how they can save money and get the most house for the money. Today we’ll go over the common question of “What is earnest money and how does it affect my mortgage?”
Earnest money is a deposit that you make to show the buyer that you’re serious. That’s it. It lets the buyer know that you are making a legitimate offer and are in it to buy this house. It also goes into your down payment. Earnest money and your mortgage go hand-in-hand.
When you’re looking for a house, buyers want you to be serious. They usually won’t even accept an offer without a deposit of earnest money, usually at 1-2% of the price of the house. It all depends on the market. The seller may require more in a hot market or ask for less in the case of a house that’s been on the market for a while.
So, who keeps track of this money? Usually, you’ll either hand the money to the title company or the real estate broker and the money will be held in an escrow account. After the transaction is finished, the money is disbursed from the escrow account for your down payment and you buy a house!
Always be careful though and research the title company or broker before you write them a sizeable check. People have lost their earnest money through unscrupulous means before.
If you decide to back out of the deal or your financing falls through, you can conceivably get that earnest money back. Usually, there will be a cancellation fee that comes out no matter what, and the holder of the escrow account determines who gets that money back. If it’s determined that you backed out without legitimate cause, you could end up losing your deposit entirely. Just make sure to read the entire agreement before signing to know your rights to that money.
Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515, Nashville at (615) 810-8555 or Birmingham, AL at (205)721-7656. You can always apply online at hero.loan for your VA Loan, and www.thehomeloanexpert.com for your other mortgage needs, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?