Toggle Navigation
Home
About Us
Our Staff
Community Outreach
Loan Options
Government Loan Programs
FHA Loans
VA Loans
USDA Loans
Reverse Mortgages
Fixed vs. Adjustable
HUD-1 Settlement Statement
Broker vs. Loan Officer
The Loan Process
Choosing the Right Loan
Step 1: Loan Application
Step 2: Pre-Qualification
Step 3: Mortgage Cost
Step 4: Congratulations
Your FICO score
What is a Credit Report?
What is a Rate Lock Period?
When to Refinance
When Should I Get Qualified?
Debt-to-Income Ratio
Due Diligence and Earnest Money
Rates and A.P.R.
Financial Closing Costs
How Escrow Works
Getting an Appraisal
Refinancing Options
Are You Pre-Approved?
Closing costs - loans
Why Title Insurance?
Types of Insurance
Title Information
Mortgage Calculators
Mortgage Qualifier Calculator
Rent vs. Buy Calculator
Fixed Rate Mortgage Calculator
APR Calculator
ARM Calculator
15 vs 30 Year Mortgage Calculator
Resources
Check Your Credit
Credit Repair Services
Recommended Locals
Financial Planning
Free Rate Quote
Contact Us
Blog
Daily Rate Lock Alert
Login
Privacy Statement
Awards & Recognition
ADR BLOG
What is Due Diligence and Earnest Money and how much should I put down for this?
August 2nd, 2018 4:08 PM by Andrew Walter May
Due diligence and earnest money is a recent (last 4 years) introduction to ensure that buyers are real. Too often buyers would make offers and walk away. Of course, only 7 years ago we were able to close a buyer in under a week - so it wasn't a big deal if the buyer walked. Now that it takes at least 12 days to close on a home (with many larger lenders it can take 60+ days - but that's not us, we generally close in 21-30 days) the seller is financially hurt by entering a contract with the buyer if that contract/home doesn't close.
Enter, due diligence and earnest monies. Due diligence is the money that the seller keeps immediately for the acceptance of the contract (sometimes savvy buyers will even move the timing of this from immediate to a week later, so the buyer can at least get inspections done). Earnest money is additional monies that the buyer gives to the seller after about a 3 week period (this date is adjustable too). In all, generally speaking a Realtor will suggest 1% of the purchase price (split 25% towards due diligence and 75% towards earnest money). For example, on a $100k purchase price the home buyer would write a check for $1k (250 towards due dil and 750 towards earnest money).
These funds ensure the seller that the buyer is real. If the loan closes, the buyer gets to use these funds to pay for closing costs, etc.
In addition to these upfront monies (your check is cashed and held in escrow), you can expect to pay for an appraisal ($450 for smaller fannie loans, $525 for USDA, and $750 for jumbo); a home inspection ($500 or so, arranged through your Realtor); pest inspections (including Radon, if you have a basement - these are like $80 for Radon and $100-200 for pest inspections).
As you can see, if you aren't properly prequalified - or don't have access to proper mortgage options (Remember, credit unions often times don't offer 30 year fixed; banks often times don't offer 100% financing through places like USDA; and other lenders often times don't do this or that - use a broker, we have access to almost all loan programs) - you can typically count on losing about $4,000 on a $300k purchase. That assumes you find this out after the first 3 weeks. You can be disqualified for the following reasons:a. job loss; b. credit score reduction; c. job change; d. material changes in finances; e. changes at the wholesale lender. So, as you can see, you want to hire a broker that has experience and has ZERO BBB complaints ever to date.
It's your money. It's up to you to protect it. Don't assume that an unlicensed loan officer will care about spending your money. At ADRMortgage, we not only care, but we are legally your fiduciary (that's another article). Take care, happy house hunting, and thank you for supporting ADRMortgage.com - your Virginia and North Carolina solution to your home financing needs (Fannie/Freddie, VA, USDA, FHA for all US citizens in Virginia and NC). 919 771 3379 - Andy May. Please see our licensing and disclosure info on our site.
Posted in:
Mortgage pitfalls to avoid
and tagged:
mortgageunderwriting
realestate
mortgages
mortgagerates
Posted by Andrew Walter May on August 2nd, 2018 4:08 PM
Post a Comment
Recent Posts:
Interest Rates become Choppy....ask about our RapidRefi plan
Down Payment Options with all 30 year fixed loan programs
Why choose ADRMortgage for your next mortgage?
Rate Alert
Refinance activity picks up, ask us for a rate quote.
Rates continue to fall and ADR continues with our ZERO BBB complaints ever (working on year 15).
HELOC Usage hits all time low
Things to avoid before buying a home
Verifying Your Down Payment, Closing Costs, Assets, Income and Debts
What are the advantages of fixed rate versus adjustable rate loans?
Archives:
January 2008
Improve your Credit Scores for Free!
August 2018
The Down Payment
Why might you need an appraisal? How do appraisals work?
What is Due Diligence and Earnest Money and how much should I put down for this?
The Final Steps In A Real Estate Transaction
Closing the Sale
July 2018
Mortgage or Deed of Trust
Why Speed Matters
Are you pre-qualified or pre-approved for a loan?
Should you consider financing closing costs, escrow reserves, or other cash needed at closing?
Should You Talk to a Mortgage Professional Before House Hunting?
June 2018
What is a FICO Credit Score?
Disputing Your Credit
How Much Can You Afford?
Scoring Your Credit - How’s Your Fico?
Debt to Income Ratios
What information will be needed for the loan application (and how it's kept private)
May 2018
How Does My "Rate Lock Period" Impact My Monthly Mortgage Payment?
Down payment requirements for Fannie, USDA, VA and FHA mortgages, according to Andy May: ADRMortgage.com owner
Down payment requirements for Fannie, USDA, VA and FHA mortgages, according to Andy May, ADRMortgage.com owner.
The Number One Reason to Select a Mortgage Company is Trust, According to ADRMortgage.com (Operating in NC and VA for 13+ years)
Why HELOCs are dead, according to Andy May
Raleigh Neighborhood Drone Videos
Best Raleigh Mortgage Broker, Andy May, Explains Top Five Ways to Tell if the Consumers' Builder is Deceptive
Donate to the American Red Cross - It's a Cathartic Experience
Why In-House, Unlicensed Mortgage Loan Officers Can Cost You $50,000
5 Ways to Make the Mortgage Loan Process Go Faster
The True Cost of Getting a Mortgage
December 2017
4 Things Every First Time Home Buyer Needs to Know About Credit Scores
Essential Steps to Take Before Hiring a Realtor, according to Andy May, President of ADRMortgage.com
July 2015
Andy May, CEO of ADR Mortgage, gives "100th pint" of blood to the American Red Cross.
June 2015
ADRmortgage.com Announces 10 Years of Perfect BBB Record
The 2015 ADR Mortgage Raleigh Tennis Pro League Kicks Off
August 2014
Top Ten Cities to Avoid for Natural Disasters - City List
Triangle home prices take a break for May 2014
Top Ten Cities to Avoid for Natural Disasters
June 2014
Don't pay your bank the upfront $500 app fee. It's junk and they know it.
CAM Raleigh Beer Garden opens June 5th 2014
ADRMortgage sponsors Raleigh Pro Tennis League.
Relocation Services Package Available
Wake County Home Prices for April 2014
April 2014
ADRMortgage.com supports the American Red Cross
CAM Raleigh receives support from ADRMortgage.com
February 2014 Raleigh Housing Report - Wake County
January 2014
Triangle home prices set to take off in 2014 - supply well under 4 months
November 2013 Data Reveal New Gains for Raleigh and Fayettville Home Prices, Heat Maps Included and Explained by Andy May (Loan Officer) and Lynn Furr (Realtor)
November 2013
Raleigh NC Broker - what to ask for
October 2013
Due Diligence and Earnest Money Tips
Pay your Mortgage off if you are approaching your 60s
Fake mortgage advertising should be banned
Should you buy or build your next home?
September 2013
Durham, Raleigh then Chapel Hill - Home Price Appreciation Ranks
The Veterans Administration's best sudsidy for veterans
July 2013
Andy May, Raleigh Mortgage Expert, Consolidates Raleigh-Cary-Chapel Hill Must-Have Data for All Home Buyers in a One of a Kind Best Places to Live
Andy May, the mortgage expert at ADRMortgage.com, explains How to Enjoy your Relocation Efforts to Raleigh, NC
May 2013
Red-Hot Real Estate Markets - The Triangle - Raleigh Durham Chapel Hill
Save thousands on your home energy costs this summer 2013
April 2013
First Time Home Buyer Questions
Home Sales in Triangle take robust step forward
March 2013
Relocate to Raleigh
Streamlined Purchases that can take less than 30 days
February 2013
First Time Homebuyer Strategies that Work
Should I go with my 18 year bank unlicensed "loan officer"?
January 2013
ADRMortgage.com Announces 2013 Mortgage Calculator
December 2012
Appraisals and your ten thousand dollars
September 2012
Home Price indices up 1.2% Year over Year through July 2012
August 2012
Builder and Realtor Owned Loan Officers
July 2012
The (Everyone gets a) Bailout Loan - June 2012 loans started closing
May 2012
Obama Buy the Vote Mortgage
The Right Fix to the Mortgage Mess
April 2012
America can be fixed - without giving away the kitchen sink
December 2011
Give me the best rate you can find....
November 2011
Manage your credit
Andy May on NBC17 Nightly News November 3rd 2011
May 2011
Credit Scores - How to Protect yours
January 2011
ADR in 2011
September 2010
ADR knows GLB - Compliance Counts!
March 2010
Raleigh Ready to Make Big Move Up in Home Prices
January 2010
New HUD Consumer Home Buying Handbook available 2010
November 2009
December 15th - Low-point for Rates
June 2009
A Tale of Two Cities - Featuring Andrew Coumo
January 2009
Where are Rates Heading?
December 2008
Rates Fall in the Fall
October 2008
American Pride - What Makes us Americans
June 2008
ADR Green Pays Green
Jumbo loan got you down?
April 2008
Why Banks Charge you More
August 2018 (5)
July 2018 (5)
June 2018 (6)
May 2018 (11)
December 2017 (2)
July 2015 (1)
June 2015 (2)
August 2014 (3)
June 2014 (5)
April 2014 (3)
January 2014 (2)
November 2013 (1)
October 2013 (4)
September 2013 (2)
July 2013 (2)
May 2013 (2)
April 2013 (2)
March 2013 (2)
February 2013 (2)
January 2013 (1)
December 2012 (1)
September 2012 (1)
August 2012 (1)
July 2012 (1)
May 2012 (2)
April 2012 (1)
December 2011 (1)
November 2011 (2)
May 2011 (1)
January 2011 (1)
September 2010 (1)
March 2010 (1)
January 2010 (1)
November 2009 (1)
June 2009 (1)
January 2009 (1)
December 2008 (1)
October 2008 (1)
June 2008 (2)
April 2008 (1)
January 2008 (1)
Categories:
Credit Scores (3)
Escrows (1)
first time home buyers, downpayments for a mortgag (4)
General (78)
Home buying Tips (1)
Mortgage (3)
Mortgage pitfalls to avoid (1)
Mortgages (2)
Philanthropy (1)
Raleigh (1)
My Favorite Blogs:
Sites That Link to This Blog:
×
Close
Add a new blog comment
*
Name:
*
Email Address:
URL:
*
Comment:
Characters from the image above:
Your entry does not match the image, please try again.
Submit Comment
×
Close
Subscribe To My Blog
*
Name:
*
Email Address:
Address:
City:
State:
Zip:
*
Characters from the image above:
Your entry does not match the image, please try again.
Subscribe
Connect With Me
Mortgage Calculator
Sales Price:
$
Down:
%
Interest Rate:
%
Term:
yrs
Calculate
Monthly Payment:
$