Ever Wonder the difference between Down Payment vs Earnest Deposit?
What is an earnest money deposit? Earnest money—also known as an escrow deposit—is a dollar amount buyers put into an escrow account after a seller accepts their offer. Buyers do this to show the seller that they’re serious about buying the home.
How much is a typical earnest money deposit? Earnest money deposits usually range from 1% to 2% of the purchase price of a home—in the state of Florida and the current real estate market—but can go as high as 10%. For example; if a home costs $300,000, a 1% earnest money deposit would be $3,000. These funds are usually held with a attorney or title company until the time of closing.
What is a down payment? A down payment is an amount of money a home buyer pays directly to the seller. The rest of the home’s purchase price money comes from your mortgage loan. For example; if your home purchase price is $300,000 and you are getting a FHA loan you are required to put 3.5% down. So your initial earnest deposit would likely be $3,000 and the balance of $7,500 is your down payment required by the mortgage loan (total of $10,500 = 3.5% for FHA loan) at the time of your closing plus the closing expenses.
Typical down payment amount… The exact amount of a down payment is often determined by the lender in relation to the overall loan amount and how much cash the home buyer has available. Down payments vary by mortgage lenders in today’s market from 3% – 20% and more. It’s ideal to put 20% down to avoid PMI (private mortgage insurance). PMI is a premium for borrowing money when putting less than 20% down. It ultimately make sure mortgage payment slightly higher.
For more information and to get your personalize estimate give the Carrie Hazen team a call and find out all the expenses associated in purchasing a new home. We will be your advocate to ensure your expenses are legal and fair! Call: 954-649-6974