What is Earnest Money?
Updated: Mar 18, 2019
Get ready to read a very exciting blog about earnest money!
But for real, your earnest money deposit plays a big role in the home buying process. In short, earnest money shows the seller that you are a ready, willing, and able buyer. It tells them that you are committed to purchasing their home. Your earnest money deposit will go towards your down payment on the day of closing.
Writing an offer without earnest money won't get your very far. It would be like going shopping on Black Friday and finding a T.V you really want and asking the store clerk to hold it for you for about 45 days, and that you promise that you will come back and pay for it then......That store clerk has no way of knowing how serious you are and will end up selling your T.V to the next person in line.
Same happens in Real Estate when purchasing a home. Does that make sense?
Sellers typically will not accept an offer without any type of earnest money deposit.
How much Earnest Money should I deposit?
The standard amount of earnest money you will deposit in Indiana is usually about 1% of the sales price. So if you wrote an offer for $100,000, your earnest money that you would put down would be $1,000. If the market is crazy and its hard to get your foot in the door, sometimes increasing your earnest money up to 2% may show the seller that you are a very serious buyer.
So, increasing your earnest money could possibly put your offer above others.
When writing the check for your earnest money, you will want to check with your lender first. They will more than likely need to see that the check written for the earnest money will come from the same account that you will be using to buy the house.
Everything has to match.
In easier terms, your neighbor can't write a check for you for the earnest money out of his account. That wouldn't fly with your lender!