How Much Earnest Money Should You Put Down During A Home Purchase?
When purchasing a home, the earnest money is essential in determining if you will get the home before the deal is closed. This amount is different from a down payment and primarily by less. In this article, you will learn how much earnest money you should put down.
What is earnest money?
When you and the seller agree on the price of home purchase, you can then move to finance, signatures, inspection, and other transactions that go with home buying. One of the critical things you are required to do is earnest deposit money. The sellers typically require this money, and they determine the percentage of what you need to pay. Like most property purchases, you can negotiate the earnest amount, but negotiating it down may not work if it is the seller's market. However, if the deal succeeds, the money will go towards your down payment.
How much earnest money do I need?
Generally, there is no specific deposit requirement, but it ranges from 1% to 5 %. It depends on the seller and the current situation of the market. In a market with high demands, the home price and earnest money are high. An experienced real estate agent should guide you in carrying out the process and making your offer. Note that if the offer is declined, you can make a counteroffer. Ensure not to put down more than you can afford. You may be required to make a wire transfer or write a cashier's or certified check for the earnest amount when it goes successful and you want to proceed.
Will I be refunded the earnest money?
You can get back earnest money depending on the circumstances. If you tell the seller that you are canceling the home buying process before a particular deadline, you will not get a hard time with the refund. This applies if you did not break any contract rules. If your offer to purchase includes principles and contingencies that carefully state when and how to handle the money, you have a high chance of getting the money back if the deal is broken.
Contingencies allow you to exit the deal with your earnest money, usually when the unexpected occurs during the closing process. Earnest money may look like another out-of-pocket cost to cover during a home purchase process, but it is crucial. It offers you protection if there is something wrong with the property and confirms to the seller that you are serious with the purchase.