Do you know about deposits and earnest cash when you buy a Philadelphia home? It takes time, persistence, and a willingness to spend some hard-earned money to negotiate the particulars of any real estate deal in order to back up your role in negotiations. Let’s go over what you need to know about deposits and earnest cash when buying in Philadelphia to understand exactly how your money works for you when buying your Philadelphia new home:
What Is Earnest Money?
While many people are familiar with the concept of a deposit on a house, when they put in an offer on a home, not as many are aware of, and willing to commit, earnest money.
Simply put, when and if the Philadelphia home seller accepts the buyer’s bid, it is an sum of money selected by the buyer that is then put in an escrow account. Part of the reason this is done is to clearly show to the seller how serious the buyer is about the real estate deal going forward.
The seller, in exchange, will then change the listing status of their property to pending sale until assessments and inspections are completed and contingencies are met. Throughout the entire duration of the negotiation, this money remains in the escrow account and until either the agreement is cancelled for one reason or another or the transaction is completed at closing.
Upon sale, either the deposit on the home or the closing expense of the buyer is usually added to the earnest money. Some buyers fail to realize that their money goes into a portion of the deal that helps them, and assume that before closing, it’s money given to the seller-this is not the case.
What Is the Deposit?
Your deposit is an sum of money at the end of the deal that is added to the selling price of Philadelphia house.
This means that the deposit is deducted from the total of the buyer’s home loan, or mortgage, in an average home sale. Though earnest money is a payment aimed at your dealing with the home seller, the mortgage lender is the payment of the deposit.
The particulars of a deposit on a home are much clearer because of the formal nature of your relationship with your preferred mortgage lender, and any potential moving parts can be decided through your negotiations with your lender.
How Much Money Are We Talking About?
You would want to prepare for about one to three percent of the proposed sale price of the home when it comes time to find out how much money you want to put down as earnest funds.
You may obviously choose to offer more or less, but a three percent earnest payment clearly shows to a home vendor that you are really driven and serious about the transaction going forward. Your home deposit is negotiable with your mortgage lender, so in order to prevent Private Mortgage Insurance as an extra burden on your monthly mortgage payment, you can try to put down 20 percent of the overall home price.
All-in-all, for both earnest cash and deposit, you can expect to pay a minimum of 21 percent of the overall Philadelphia home selling price.
Why Do These Exist?
Trust is the best way of understanding why any of these payments happen.
By investing money in advance as a demonstration in good faith that you are taking your bid and the potential future selling of the property seriously, you create trust with the home seller. The deposit is made partly to prove that you are committed and to establish trust in your mortgage lender, but it is also a way to escape private mortgage insurance. PMI is an extra payment required for all traditional mortgages before they have paid off at least 20% of the property’s negotiated sale price.
Help Buying a Home in Philadelphia
If you have concerns about earnest cash or other questions relevant to home buying.