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When You Find A Home
Once you find the home you want to buy, you will need to write up an offer. Your agent will normally assist you in this process. You will also normally need to write up a check at that time for the earnest money deposit. If your offer is accepted, the deposit check will be cashed at that time, so be prepared to spend that money by the time you think you will be ready to put in an offer on a house.
An earnest money deposit is money to show good faith; that you definitely plan on going through with the purchase. It will be applied towards downpayment and closing costs if you go through with the purchase. If you do not purchase the house, and it is not your fault, you are entitled to get the deposit back. The process for returning a deposit varies from state to state. If you do not purchase the home and it is your fault, you could lose the deposit.
The amount of the deposit is generally customary in an area (although the deposit is still negotiable), so it may be different depending on where you are moving. You may need as much as 5% of the purchase price. The larger the deposit is, the more impressive your offer will be, so if you are afraid you might not get that house you really want, this is a good way of improving your odds. Plus it’s money you will be spending in two months anyway. If your deposit is too low, you may be throwing away your chance of getting that house.
After your offer is accepted, you will have a relatively short period of time to apply for financing and get your home inspection done. You will probably be writing checks on both of these occasions, so make sure you leave yourself enough to cover both of those. Be careful with your deadlines. If you schedule your loan application on the last possible day and something bad happens, you could jeopardize the contract. Take note that many times the deadline for the home inspection is to get the house inspected AND request any corrections to be made based on the inspection. If you wait until the last day to get it inspected, you won’t get your request for corrections to the seller in time.
©2002 Douglas R. Barry