Three Things Most Buyers Don't Understand

Earnest money deposit

Money given by the buyer with an offer to purchase which shows good faith. The earnest money check is made out to and deposited by the escrow company. The amount of earnest moeny is negotiable and can be applied to closing cost, down payment, or refunded at closing. If the buyer breeches the terms or conditions of the purchase contract, the earnest money can be forfeited. If the seller breeches, the earnest money can be refunded to the buyer.

Closing cost

Expenses which are in addition to the selling price in all real estate transactions. Closing costs are negotiable between buyer and seller except when the mortgage is a federally insured loan such as VA or FHA which does not allow the buyer to pay certain closing costs.

Click here to view a sample closing cost sheet.

Impound Accounts

Money collected at closing and held by the lender to pay taxes and insurance on the purchased property. Normally one year and two months of insurance premiums and four to six months of taxes. Your monthly mortgage payment consists of principal and interest on your debt plus one month of taxes and insurance. From this account your lender will in turn pay your insurance premium annually and every six months pay your tax debt. Most lenders require impound accounts.