Rebecca Richardson - Mortgage Consultant
What is Earnest Money?
What's earnest money? Earnest money is money that is given upfront when you put a home under contract.
With your realtors’ help, you're going to negotiate a price when you're closing. If they're paying any closing costs, and also the earnest money, and the earnest money is basically demonstrating that you have skin in the game that you have an intent to purchase the home. Now you still go through the normal process of having inspections, getting your loan, approved, the appraisal, all of those kinds of things. But the earnest money is money that is given upfront, typically a percentage of the sales price around 1%. But your realtor will be able to give you the correct guidance on what will be needed to make this transaction work.
What happens at closing, though, is it's important to understand that that money isn't gone. when you close on the house that actually comes back to you in the form of a credit against your down payment or closing cost. It's important to understand that there is going to be some money that is going to be required upfront to put him under contract, their earnest money, typically inspections and the appraisal. But keep in mind that those are a prepayment of fees that you would have any way or charges that you would have anyway and that it's going to be something that's going to come back to you at closing.
Make sure that you discuss with your realtor the right amount of earnest money to help you get the house that you want.