What is Earnest Money? Q&A
Why do we need Earnest Money to buy a home?
To secure the offer on a home for sale and let the sellers know you are a serious buyer.
How much Earnest Money should we expect to give?
In Colorado, it is indicated on the listing how much Earnest Money is expected but recommended is 1-1.5%.
Who holds the Earnest Money?
Most of the time the title company’s escrow account but there are some brokerages who will also hold the earnest money.
How is the Earnest Money applied to my loan?
Most of the time it’s rolled into the amount of the down payment. There are a few exceptions. For example, VA loans may require no down payment therefore it could written in the contract that the Earnest Money helps with the closing costs or cash back at closing. Check with your Realtor for details.
Is there a risk to losing your earnest money?
The answer is yes however it is highly unlikely. There contingency deadlines made throughout the offer that protect you from losing your earnest money if you have to back out of a deal over one of those. This is why meeting deadlines is important when buying or selling a home.
*** Please note for legal advice regarding earnest money it is always best to consult with an attorney.***
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