Earnest Money Deposit and the Naples Home Buyer

When you put in an offer for a Naples or Marco Island home, you will most likely be asked to put down an Earnest Money Deposit. This shows the seller your commitment to buying the property. In return, the seller agrees to take it off the market while the sales process takes place. But what happens if your mortgage loan falls through? Do you get the deposit back? As long as you take a few measures to protect yourself.

After you put in an offer on a Marco Island or Naples home, you will be asked to put down an Earnest Money Deposit. Protect these funds from forfeiture by utilizing these protective measures.

Earnest Money Deposit

What Is It?

Search homes for sale in the Naples/Marco Island areaAn Earnest Money Deposit is considered a “good faith” payment. Typically, it runs anywhere from $500 up to 2% of the sale price. This money stays in escrow until the final sale. At that time, it usually gets credited towards the down payment and/or closing costs. If the deal falls through at any time, the funds may be given back to the buyer or forfeited, depending on any contingencies in place.

Financing Contingency

One way to protect your earnest money is by implementing a financing contingency into your sales contract. This protects you in case you can’t secure funding for the property. Without this contingency, you forfeit the deposit if funding proves impossible.

One way to ensure your deposit stays secure is to seek out a pre-approved mortgage. Start the process well before you begin looking at Naples or Marco Island homes. This helps you form a budget since you now know how much a bank will lend to you. Stay within that price point and you should be OK.

Pre-Approval Doesn’t Equal Final Approval

Even with a pre-approval letter, your home loan could fall through in the end. How? Lenders run an initial credit check when they perform their pre-approval process. Then, when it gets closer to closing, they run another credit check. Any changes in that time might jeopardize your approval. So, while in escrow, abstain from making any large purchases (furniture, cars, etc.). Also, put the kibosh on opening any new lines of credit. These could temporarily ding your credit and put you below the acceptable levels for approval. Wait until after you sign your final paperwork and move into your new home before making any major purchases.

Michelle Thomas, Premier Sotheby’s International Realty, Luxury Naples/Marco Island Homes & Condos