Oftentimes, home buyers get confused and think the EMD and down payment are one in the same. Here is a breakdown highlighting the key differences.

What’s an Earnest Money Deposit (EMD)?

Earnest money is a deposit placed into an escrow trust account to represent a buyer’s good faith to buy a home. The earnest money deposit commits the buyers to their offer and gives the sellers some protection should the buyer not follow through in purchasing the property.

How much Earnest Money do I put down?

There is no fixed amount for an EMD but it usually ranges from 1-5% of the purchase price. In particularly competitive markets with low inventory or multiple offer situations, higher EMDs are common to strengthen the offer. The buyer has 3 business days after the offer is accepted to deliver the earnest money deposit.

What is the Down Payment?

The down payment is the difference between the purchase price of the house and the amount being financed. The buyer must deliver all down payment funds prior to the close of escrow. The required down payment amount varies depending on the type of loan, ranging from as little as 3% for an FHA loan to more than 20% for some conventional loans.

An escrow company that will educate you along the way is key.

At Foundation Escrow, we take pride in educating our clients, whether first-time home buyers or seasoned investors, there are NO stupid questions. Our transparent escrow process and friendly Escrow Officers will make you feel protected and at ease.