Question

earnest money amount?

I am going to go through with buying this house and the real estate agent says i need to try and come up with $500 earnest money. this is my 1st home so i am not sure on stuff. do i have to pay this amount? if i borrow the money can i get it back when the closing is done and give it back to the people i borrow it from(parents):)?
i am not sure how this works.
also how much is the usual closing costs on a 60000.00 loan. it's a smaller house so cheaper loan-the sellers are assisting 3200.00 in closing costs do i need more?

7 years ago - 7 answers

Best Answer

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Earnest money is just an insurance for the seller incase you default/breach the contract to purchase. $500 is not really alot in booming areas. Houses in my area usually see $1000 - $2000 for earnest money. But with a house of $60K, $500 earnest deposit is good enough.

The earnest money usually goes into the closing cost, unless you specify otherwise with the lender and the title company where settlement occurs.

A rough estimate of closing cost is around 3-4% of the sales price. This of course is not 100% guarantee, just a ball park figure because closing costs can differ base on the number of points purchased (bringing down your interest on the mortgage). So $3200 is good enough of a coverage.

You will need to work out with the lender to see if they can mortgage the closing cost also-(if there are any). There are tons of programs that lenders have that will allow you to get cash back from settlement (basically it digs into the equity of your new home). That's how you'll be able to pay back your parents.

7 years ago

Other Answers

Yes, it is normal. Most sellers require earnest money. It can be applied to the closing costs or reduce the amount of the loan.
Also, none of my business but if you don't have $500 dollars why are you buying a house?

by drctrutops - 7 years ago

$3200 should cover you on the closing costs, depending on your state. You might need to cover a bit more to pay for your first year of homeowner's insurance, which is paid in full at closing.

Earnest money is simply a deposit, and you get it back (or credited to your transaction costs) at closing. If your costs don't exceed the $3200, you'd get all $500 back. And yes, it is expected, and yes you almost always have to put some earnest money into the deal.

You seem to be very poorly informed, considering you have an agent. I don't think your agent is very good, and if you don't know what your closing costs might be, you should have been shopping around for a mortgage before making offers on houses, so that's another reason why it seems like your agent sucks. Your agent should have made sure you can even qualify for the home before letting you make an offer.

Source(s)

by fukinluckyfuker - 7 years ago

earnest money is credited toward the purchase of the house. You will see it on the closing statement. Your are making a down payment on your purchase. You won't see the actual money again, It is applied toward the purchase.

$500 seems cheap.
Your lender is required to give you a good faith estimate of closing costs. Ask for it NOW. You shouldn't proceed without knowing. If it seems high then call and get another quote NOW. You can change your lender any time up till the closing. There shouldn't be any charges unless there has been an appraisal. Are you using an attorney? If so, they should be advising you. If not, your RE agent should guide you.
You are using an agent or atty aren't you?

by zocko - 7 years ago

Earnest money is required and it will taken off your closing costs. Most lenders do not allow all of your closing costs to be paid by the seller. You most probably have to more money in for closing. The banks want to see some kind of vested interest for you to get the house. Also like the others said, you probably shouldn't buy a house if you have to borrow 500 bucks

by Amir T - 7 years ago

If you can't afford a small amount like $500 for earnest money, then, frankly, you have no business even buying a house. Inspections will cost more than $500, and there are things you'll want to buy for your new house let alone earnest money.

I had $15,000 for my first house, and was surprised at how fast that went...and that was with ZERO down.

If you don't have $500 for earnest money, you shouldn't be buying a house. Earnest money shows the buyer that you're serious about wanting the house. If you have to borrow it, forget it.

by cardinalboy97 - 7 years ago

$That agent is being very generous only taking a $500 earnest money amount. I advise my sellers to take no less that $2500 for a deposit, and usually try to get 5% of the sale amount.
Again, if you do not have 500, why are you trying to buy a home. The foreclosure rate is rising by the day, please try not to become another one. How are you paying for your inspection or your first years insurance?
Good Luck,
RE Agent.
Remax

by frankie b - 7 years ago