If you’re buying a home, you’ll most likely need to put down an earnest money deposit.
But what is it… and how much is it?
What is an Earnest Money Deposit?
An earnest money deposit is a good faith deposit of money to show the seller that you’re willing to secure the purchase contract.
In other words, you put down an earnest money deposit so the seller knows you’re a serious buyer and won’t sell the home to someone else.
Think of it as putting your money where your mouth is.
How Much is an Earnest Money Deposit?
There’s no set standard for an earnest money deposit. For the most part, though, an earnest money deposit is between 1 and 3 percent of the home’s sale price.
If you’re buying a home that costs $200,000, you can expect to put down between $2,000 and $6,000.
However, there’s no hard and fast rule; you may end up putting down less (particularly if you’re using a VA loan or another, similar type of financing) or you can choose to put down more. In some cases, buyers put down more as earnest money deposits to encourage the seller to accept their offer.
What Happens With Your Money After You Make an Earnest Money Deposit?
Typically, your earnest money deposit is applied to the balance due on your mortgage or it’s used to pay for your part of the closing costs.
There are rare circumstances in which you can lose your earnest money deposit, though, so talk to your Lake City Realtor® before you commit to putting money down.
Are You Moving to Lake City?
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