Today we’re here with Tim Chase from 719 Lending to explain everything you need to know about earnest money.
First of all, what exactly is earnest money?
Earnest money is the equivalent of a security deposit. It’s the money you put down in order to proceed with the contract. In Colorado, there are many points throughout the contract that protect you as the buyer, so you can get your earnest money back if you were to exit the transaction.
The best part about earnest money is that if you get all the way to closing, that earnest money is yours! It can go toward your down payment or your closing costs, whatever it may be.
A lot of buyers want to know if they can use a credit card to pay earnest money. Earnest money can only be provided through secured funds. This means that the funds you provide as earnest money must come from a bank account. Earnest money cannot be provided via cash, money order, or credit card.
Other buyers may have gift money that they want to use for the earnest money deposit. Luckily, you can use gift money as earnest money! It’s acceptable to have someone else provide you with earnest money, so long as they provide secured funds.
Why are secured funds so important? Your lender is required to track where your earnest money comes from. Anti-money laundering laws require your lender to verify that the money you provide was in your bank account and came from your account. So once that earnest money check is cashed, plan on providing your lender with a new, updated bank statement.
Don’t forget that once you close, that earnest money is all yours!
If you have any other questions about earnest money or would like to learn more about real estate in our area, just give us a call or send us an email. We would be happy to help you!