Once a buyer and seller come to an agreement and are in contract, the next step is to deliver earnest money to the title company. While this seems simple enough, there are numerous things that need to be avoided or they could cause issues down the road. Below are helpful “Do’s and Do Not’s” regarding earnest money.
- Wire the money directly to title from your bank account to allow the funds to be sourced.
- Use a personal check directly from your bank account to allow the funds to be sourced.
- If utilizing gift funds, do have the donor wire the money directly to title to allow the funds to be sourced.
- Do not purchase a money order, money orders are considered cash and cannot be sourced
- Do not supply half the earnest from an account, and the other half in cash.
- Do not have a non-eligible gift donor write a check or wire earnest money to title.
Lately, the popularity of discount points has grown rapidly. A discount point is a fee paid to get a lower interest rate. One discount point is equal to 1% of the loan amount.
The amount of discount points purchased is included in the projected closing costs. The desire to have a lower interest rate than the current market rate has caused discount points to become more the norm. Many lenders are quoting discount points upfront without discussing what they are with their borrowers. This can have a dramatic effect on the total closing cost. For example, 1% of a $300,000 loan is $3000. When getting a quote on the projected closing costs, make sure to ask the loan officer if this includes discount points, as it will have a significant effect on the amount of money needed out of pocket to close your loan. It can prevent costly surprises down the road. If you have any questions or need any advice, don’t hesitate to reach out!
- Don’t open new debts while in contract
- Don’t quit your job
- Don’t deposit substantial amounts of cash into your bank account.
- Disclose all debts
By Andrew Augustyniak, Branch Manager Prime Lending