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Renter, Renter in Philadelphia, PA

Earnest deposit at 1% as a first-time homebuyer, how likely is it that this will be an issue?

Asked by Renter, Philadelphia, PA Sat Apr 23, 2011

I'm in the process of purchasing a home. I am only offering 1% earnest deposit. This is my first house. I just want something reasonable that is my own. However, I don't want to invest too much because I would like to upgrade within the next 5-7 years. How likely is it that this will be an issue when making an offer?

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Renter,

Your offer will be stronger and more competitive with a higher deposit IF your financing is secure and in order. If you don't have a good financial picture to present, deposit money won't matter.

What people here were trying to say is that the good faith deposit is ultimately applied to your required funds to close. In other words, if you'll need $4000 to meet your required 3.5% contribution to the deal, why not put $2000 of that down to show your good faith and investment in this particular property?

Hope that helps!

hannahangert@comcast.net
0 votes Thank Flag Link Sat Apr 30, 2011
Earnest money should be enough that it let's the seller know you are serious, and enough that it would be at least a little painful to walk away from the offer for no reason, other than you just changed your mind. take a Look at what the down payment will be and work from there. If you're putting 20% down on the mortgage of a $200,000 home, that's $40,000. Earnest money will be applied to your down payment at closing, so if you're really serious about the home, put it up now! The seller will be more receptive to your offer.
Do I think you need to put that kind of money up front? No. Unless you're running into competition with the offer, and need to show the seller you're the one that's going through with the transaction.
In today's market, seller's should be happy they've got an offer, so unless earnest money is so low that it won't make it painful for a buyer to walk for no reason, it should never be countered. 1 or 2 thousand for homes under $200K should be good. $5K- $10K up to $500K, and if you're buying higher, use the down payment as a guide.
0 votes Thank Flag Link Wed Apr 27, 2011
If you are planning on buying in philadelphia, we culturally put down more but its a negotiation. Keep in mind, you will need a minimum 3.5 percent to buy anyway. In nj where I am also licensed, 1000 is common. Less so in philadelphia
0 votes Thank Flag Link Wed Apr 27, 2011
We are recently in the process of buying. In our area and it depends on the seller, we put down 1500 on 107k offer. little more than 1%. That sounds about reasonable though. your agent should help you with that.
0 votes Thank Flag Link Sun Apr 24, 2011
Thanks everyone. I am refering to the good faith deposit. Not the downpayment towards the loan.
0 votes Thank Flag Link Sun Apr 24, 2011
Hi Renter,

Not at all, if you are referring to earnest money as good faith money made with purchase offer, some amount offered at the time to let the seller know you are serious. Sometimes no money is presented at the time of offer, it's totally up to the buyer to make that decision. If you are referring to earnest money as a downpayment to the bank for a mortgage you may be short and limited on your choices.

Good luck,Renter.

Bill
0 votes Thank Flag Link Sun Apr 24, 2011
Renter,

You've been provide with good information. We would like to add that are a variety of programs and rates out there. It would likely be best for you to meet with a couple/several loan specialists to explore programs, rates and options.

There's much more to borrowing than meets the eye. It would be best to start collecting information as soon as possible.

Good luck,

Bill
0 votes Thank Flag Link Sun Apr 24, 2011
Hello Renter,
A 1% earnest money deposit is usual in my region. Joan is correct that you probably will need to put more money down for a lender to consider you for financing. An FHA loan only requires 3.5% down if you qualify.
I suggest that you contact a local mortgage broker to learn more about what your financing options are and work with a local experienced real estate agent to guide you through the purchasing process. Usually, there is no fee to work with a real estate agent on the buying side.
Hope this helps.
Good luck!

Laura Feghali
Prudential Connecticut Realty
0 votes Thank Flag Link Sat Apr 23, 2011
The earnest deposit is not the same as a downpayment. Its really just a way of letting a seller know that your offer is a serious one. It can be $100 or $1000 or any amount you wish, including $0, although for some reason $1000 is a common number. Not really sure why it ended up that way.

If 1% is all you can afford for a downpayment, then it will become a serious issue with lenders and what loans are available to you.
0 votes Thank Flag Link Sat Apr 23, 2011
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