Once you start looking at houses you will hear a lot of words you probably have never heard before. People in the real estate business sure love their jargon.
Something you will hear about as soon as you start looking is “earnest money”, but what is earnest money?
Earnest Money is simply money you positioned down as a good–faith gesture that shows you are serious about buying a house.
Usually it’s one to five percent of the house you want to buy.
While you wait to close your house, the money is deposited into an escrow account with the seller’s broker, title or escrow company.
Earnest money shows the seller you are not playing games and really want to buy the house.
It gives you credibility and gives the seller peace of mind.
The amount is most of the time a percentage (1-5%) of the price you and the seller agreed upon.
In some markets, you will be required to pay a set amount of money, usually $1k-$5k.
Keep in mind that your earnest money is not part of your down payment. If everything goes as planned and you close on the house, the earnest money will get folded into your closing costs.
Make sure to read your contract carefully, there are a few things that can cause you to lose your money such as; the house didn’t pass inspection, the appraisal of the home was not the right amount, or you can’t get financing.