When you are buying a home, the mortgage and real estate verbiage can be a little confusing. You’ve probably heard of earnest money deposits and down payments, but do you need both? Are they the same thing? So what is the difference between Earnest Money and a Down Payment?
Earnest money is a deposit buyers will provide with an offer to the seller showing them they are serious about buying the home. Typically this is between 1% to 2% of the purchase price of the home. The check is usually held by the buyers real estate agent until an offer is accepted and then placed into an escrow account until closing. If all goes as planned, the funds will be applied as a credit towards your down payment at closing.
This leads us to the down payment and what is it? The down payment is the amount of money being put down on the home paid to the seller. The difference of the down payment and purchase price comes from your mortgage. The amount you’ll be required to put as a down payment will depend on the type of loan you get and lender requirements.
However, the feeling of owning your own home is exciting and rewarding, so if you have your heart set on buying, there are options out there to help you achieve your dream of homeownership. If you feel that the time is right, give us a call.