Tuesday, January 7, 2014

What is Earnest Money and How Does It Work?

Q: My mortgage loan officer is saying that earnest money is the $1000 that I gave to my Realtor/Title when I signed my purchase contract. She wants a copy of the cancelled check, saying that she would give me credit for it when I go to closing or credited towards my downpayment. Does this sound correct?

A: While I’m not sure that I understand your question, I will go ahead and give you an explanation of “earnest money.” As you indicated, earnest money is the deposit that you put down when you signed a contract and made an offer on the purchase of a home. These funds will be credited to you at the time of closing when you will be required to pay the down payment and other closing costs.

It sounds like your Realtor wants a copy of the cancelled check to provide to escrow or possibly to complete their in-house transaction file. Your Realtor is doing their job in making sure that escrow has a copy of the payment to ensure that you will be credited at the time escrow closes. Of course, if your offer on the property is not accepted for some reason your earnest money (deposit) should be returned to you. Hope this helps.


No comments:

Post a Comment