The deposit is an important part of buying a home because not only does it fund your down payment, but it also lets the seller know you are committed. Without earnest money, a person can make several offers on different homes, taking them off the market until a decision is made. Because of this, sellers likely won’t accept offers without deposits. Once an offer is accepted, the earnest money goes towards the down payment and closing costs, and often if you find something that you don’t like about the home you can get your deposit back. Keep reading to learn what to know about the earnest money deposit and find the full article here.
How Much Should You Put Down in the Earnest Money Deposit?
The amount you’ll pay for the earnest money deposit will depend on a few factors, such as policies and limitations in your state, the current real estate market, and what the seller requires. On average, however, you can expect to hand over 1-2% of the total purchase price as earnest money.
In some real estate markets you may end up putting down more or less than the average amount. In a real estate market where homes aren’t selling quickly, the seller may only require 1% or less for the earnest money deposit. In markets where demand is high, the seller may ask for a higher deposit, perhaps as much as 2-3%. You can sometimes win a bid if you give the seller a large deposit. In fact, the seller may be willing to come down in price a little if you make a bigger deposit.
However, you may wind up having to do some paperwork for your mortgage lender, and the bank may want to verify the source of the funds for larger deposits. It won’t be a problem if you can show that you’ve had the money for at least 60 days.