Adventures of a First Time Home Buyer! Part 3 - Earnest? What the heck is earnest?

Welcome back to
The Adventures of a First Time Home Buyer


Today, we'll go over Part 3 ~ Earnest?  What the heck is earnest?


 Now, this is actually something that we found out AFTER we found our house so I'm doing this a little backwards.  I wanted to make sure that y'all knew about this expense BEFORE you found the house of your dreams and made an offer.

 Surprise # 6...WHAT?  We have to have cash to buy a house?  Who knew?!?

 As a First Time Home Buyer I had a lot of questions...one of which was, 
“Are there any “out-of-pocket” expenses do I need to plan for ? 
{talking $$ outside of your down payment and closing costs}

Many loan programs today require very little cold hard cash.  But there are a few instances in the home buying process where you will need to have some dough.

EARNEST MONEY
Also known as: good faith deposit or binder

Earnest money is money that accompanies an offer to purchase real estate. It is usually held in a real estate broker's trust account until the property changes hands. It is credited to the buyer's funds/down payment at settlement.

Earnest money accomplishes a few thing:

1) It conveys that your intention to purchase the property is serious.
2) It can help  demonstrate your financial ability to satisfy the contract and strengthen your position as a solid, qualified buyer.
3) It provides remedial damages for the Seller in the event that you back out of the contract for a reason not stipulated in the contract
The actual amount of earnest money will vary with each particular market. In general, it will represent between 1 to 2 percent of your offer price. If your offer is accepted, the earnest money will be deposited into a trust account or with the escrow company, shortly after acceptance. At closing, this money is applied to your closing costs or down payment.

Note that you will also will have the cost of a HOME INSPECTION


stay tuned for that...
Part 7 ~ The 11th hour...now is the perfect time for something BAD to happen!