Archive for June 30, 2014

What’s Earnest Money for?

What is earnest money for?  Earnest money does a couple things for first time home buyers.  One, it’s a show of good faith to the seller that you have the financial capacity to purchase the property.  Two, and more importantly it’s a remedy for default in case you decide to illegally breach the sales contract.

So it’s like a deposit?  Yup, that’s another way to think about it.  If a first time home buyer breaches the contract, the seller is going to be very inconvenienced by having to go back on the market and find another buyer.  They may also be out a fair amount of money, so they just want to confirm that the buyer is serious about purchasing their home.

How much does earnest money have to be?
  It really depends, but a general rule of thumb is somewhere between 1-3% of the purchase price.  For instance, somewhere between $2,000-6,000 for a $200,000 dollar home.  Again, this is just an example as the amount can vary in each specific money in the windsituation.

That’s a lot of money!  We realize that this can be a large amount, especially for first time home buyers just starting out.  Please keep in mind that like a deposit this money is credited towards the final purchase.  So as long as you DO NOT breach contract and move forward to closing (which most buyers do) the earnest money will be credited towards your down payment amount.

But what if I decide I don’t want the house?  There are also several protections in the contract that give you outs in certain instances, but we’ll save this for another blog.  Before writing an offer and making a decision about earnest money, be sure to consult with your licensed real estate broker.

Don’t make the biggest decision of your life without getting educated!
  If you’d like to learn more about earnest money or the home buyer process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer/Down Payment Assistance workshops.

Share

What if I Don’t Close on Time?

What if I don’t close on time?  Closing your home purchase on time is crucial!  Many lenders think if a first time home buyer misses their close date it’s not really a big deal.  “Just get an extension”, they might say.  But it’s not this easy, so make sure you ask your lender up front how long it will take them to process your file, and hold them to it.

How does it affect me?  Much of first time home buyers lives will revolve around their closing date.  You’ll give your landlord notice that your vacating, you’ll schedule movers, you’ll potentially have new furniture delivered.  If you miss your close date it will probably throw a monkey wrench into your entire life, not to mention you not having a place to live for a while!

Does the seller care?  The seller’s life will also revolve around the close date.  They’ll be scheduling similar situations, so they want to stay on schedule as much as you do.  They also may be buying a new place, and they usually Senior man showing a for sale signcan’t close on their purchase until you close on purchasing their existing home.  So the seller is very concerned with you closing on time.

Sounds like just a bit of inconvenience.  The biggest thing for first time home buyers to be aware of, is if you miss your close date the seller DOES NOT have to give you extra time to secure your loan.  In today’s current housing market, many buyers are placing back up offers on homes that are already under contract with other buyers.  If you miss your close date it gives the seller a way to EXIT the contract and potentially sell to another buyer!

Don’t make the biggest financial decision of your life without getting educated!
  If you’d like to learn more about the closing timeline or the home buying process in general, please go to our Calendar/Reservations page and register for one of our First Time Home Buyer/Down Payment Assistance workshops.

 

Share