What is Earnest Money When Buying a Home


When you are ready to make an offer on a particular house and maybe want to show the seller that you are serious about the purchase, there is a way you can use to prove your seriousness. And this is where earnest money comes in in the home buying process.  

So, What is Earnest Money?

Earnest money or good faith deposit is the amount of cash you put down; therefore, the seller is closing a deal to show your commitment to purchasing the home. Once a seller and buyer enter into a purchase agreement, the seller will take home off the market while the whole home buying transaction goes through the closing process. However, if the deal does not go through, the real estate agent will re-list the house and start the entire sale again, leading to a substantial monetary hit. Earnest money, in most cases, acts as a deposit in the dream home you want to buy. The buyer delivers the money when signing the purchase or sales contract. Moreover, this good faith deposit can as well be part of the hospice buying offer. Before closing the deal, the buyer and the seller sign an agreement that defines the terms and conditions of refunding the earnest funds.  

Benefits of Earnest Money

Earnest money protects the buyers in the case when the seller backs out. In most cases, the money is about one to three percent of the overall home selling price. Generally, cash safeguards the interest of both the seller and the buyer. It shows the buyer’s seriousness in buying a home.  

How Much is Earnest Money

The amount of earnest money you pay depends on what is customary on your market. But approximately one to three percent of the overall sale. However, if you want to buy a home in a neighborhood inclined to bidding wars, it will be helpful if you offer a considerable amount.  

Conclusion

Earnest money is the sum that a buyer pays to show their seriousness in buying the home. Arizona home loans can be obtained with someone by your side. If you are stuck in getting the earnest money to secure a home, look to Spire Financial and see which loan option is right for you.  

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Disclaimer


V.I.P. Mortgage, Inc. DBA Spire Financial does Business in Accordance with Federal Fair Lending Laws. NMLS ID 145502. For state specific licensing, visit www.vipmtginc.com/national-licenses/. V.I.P. Mortgage, Inc. is not acting on behalf of or at the direction of the FHA/HUD or the Federal Government. This product or service has not been approved or endorsed by any governmental agency, and this offer is not being made by any agency of the government. V.I.P. Mortgage, Inc. is approved to participate in FHA programs but the products and services performed by V.I.P. Mortgage, Inc. are not coming directly from HUD or FHA. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions may apply. This is not an offer to enter into an agreement. Not all customers will qualify.

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