How Can You Protect Your Earnest Money Deposit When Buying a House?

When you buy a house in the States, you are usually asked to pay an “earnest money deposit“, otherwise known as a “good faith deposit”. This amount is not the same as a down payment. Instead, when a property buyer signs a contract to buy a house, they agree to pay a certain amount in good faith. This deposit is to secure the contract. The contact also agrees on the amount to pay as down payment. The amount the buyer will pay can vary as there isn’t typically a set rule. For example, in California a contract must contain a clause about an earnest money deposit, but it can be as little as a dollar. The purpose of the earnest money deposit is to express the buyer’s commitment to buying a property. When you go through with the sale and close the contract, your earnest money deposit goes towards the total of the down payment.

Buying a House

Doug Kerr

Protecting Your Deposit

But how can you make sure you keep your money safe when you pay an earnest money deposit? If you aren’t careful, you could fall victim to a scam and someone could make off with your hard-earned cash. In order to avoid this happening, there are some rules you should follow. Firstly, you should never give the money directly to the property seller. Instead, it should be paid through a third party, such as a reputable real estate broker, legal firm or escrow company. The third party should deposit the money into a separately maintained trust account. And you should make sure to obtain a receipt for the payment. Don’t release your money until you have closed the deal on the property. You can then pay your downpayment and, once you’ve moved in, your mortgage payments too.

Getting Your Deposit Back

If you choose to withdraw from the contract, you may or may not be able to get your money back. This will depend on the law in your state, as well as your individual contract. In some places, you can withdraw and get your money back within a certain period. Cancelling the contract could result in a dispute if there isn’t agreement about whether the buyer has forfeited their deposit.

Other Methods of Protection

On top of making sure you pay your deposit through a third party, how else can you make sure you don’t lose any money? One way is by not putting the money forward in the first place, and this involves thoroughly inspecting the property. If you spot any potential problems before putting a deposit down, you eliminate the risk of losing your deposit later. When you work with estate agentsĀ  in Letchworth or your local area, they can advise you about professional inspections of the property. A professional inspection is much more reliable than walking through the property by yourself.

Once you have made an offer, you can help yourself by reading the seller’s disclosures carefully. Making sure you understand all the information will help you make an educated choice about whether to buy. Knowing that you won’t change your mind is the key to protecting your deposit. If you definitely buy the property, you won’t lose any money.

Second Mortgages

Second Mortgages
Second Mortgages

Are you yearning to open up your own business? Do you find yourself sweating over all your extra expenses and bills every month? Sometimes when you need some extra money a second mortgage may be the best option for you!

A second mortgage, best put, is a loan that you take out against your home.

If you already pay a mortgage on your home and you find that you need extra cash and can not attain it through credit cards or other loans, you could always try for a second mortgage. For example, say you have been dreaming about opening up your own small business for years, but find that you do not have enough finances to cover the expenses of getting started. By taking out a second mortgage on your home, you can get the cash you need fast and efficiently.

Also, if you find that that last vacation you took ate a very large metaphorical hole in your pocket, add that to the other expenses, and it is overwhelming? A second mortgage can help you land on your feet.

With the exception of Texas and West Virginia, every State allows from an eighty five percent to one hundred and twenty five percent second mortgage value of your home equity.

The best strategy to go about getting a second mortgage on your home is to first and foremost, shop and compare. Go to several different lenders, and compare percentages and costs for a second mortgage. Find out which lender will offer you the greatest deal for what you are looking for in your second mortgage, and assemble all the necessary paper work. Before you can be approved, the lender will have your home appraised, to find out what the property is worth to determine how high, or low, your second mortgage will be.

This process is quite similar to that of taking out your primary mortgage.

You will sign the necessary forms and there will also be closing costs to consider when finishing your second mortgage process. If you do not have the money to pay the closing costs, rethink your options.

The second mortgage works much like your primary mortgage, consider this before applying though; you will have to pay off the primary mortgage before payments will apply to the second mortgage. So once you finally pay off that primary mortgage, do not get over excited, because their will still be that second mortgage to pay off. Think everything through and make sure this is the right thing for you to do before taking action. There are always other options if you need to borrow money even if you happen to have bad credit problems in the past, and a second mortgage may not be right for you.

Second Mortgages