How Big Of A Deposit Should I Really Make?

How much of a deposit or down payment you make with your offer to purchase to buy a home not only makes a difference in the terms you will get on your mortgage loan but can also play a big role in whether or not your offer is accepted by the seller or not.

However you also want to keep in mind that deals can fall apart and you should try to minimize your exposure just in case an unforeseen issue does arise. Remember your full down payment isn’t really due until the time of closing so your deposit at the time of making your offer can always be less than that.

Different areas of the country and different types of properties have different customary deposits, though everything is negotiable. On average most deposits across the country range from 1-2% of the purchase price of a home. However the current buyers market can mean being able to offer less and many buyers have been able to get offers accepted with as little as $500 earnest money.

Use the deposit amount as a negotiation tool and perhaps offer less at the beginning so that you can increase it in exchange for other concessions like closing dates, repairs and more. You can also break up your deposit into more than one payment. This can help satisfy a seller’s concerns while giving you time to have inspections and appraisals performed as well as getting a solid loan commitment before putting up any more money. So perhaps $500 at the time of the offer and the balance of 2% of the purchase price within 2 weeks. However if you are really desperate to get a certain property, must have it and know other offers are being made on it you may want to go in as strong as you can in order to make your offer look superior to the others. Providing that you have the right contingency clauses in your contract your can normally withdraw from a contract and get your deposit back if you have to.

However you do need to be careful of who you give your earnest money deposit to. You should never give any money directly to a seller prior to closing. If you have a real estate agent representing you their office ought to have an escrow account where your deposit money can be held securely. Otherwise you should only deposit money in your own attorney’s escrow account or with a title company of your choosing.