Jeff’s Carlsbad Blog for First Time Home Buyers


FAQs – Part 3 (downpayments)

Posted in FAQs by Jeff Dowler on October 24, 2006

moneysign2.gifWhat is a downpayment? How much money do I have to put down as a deposit? Can I submit an offer without a deposit?

When you submit an offer to a seller you are expected to provide a downpayment (a.k.a. earnest money, deposit), which is an amount of money (typically, but may be other consideration that is acceptable) that is used to secure the offer and demonstrate good faith on your part that you are serious. Normally this must be submitted at the time of the offer – your REALTOR may submit a copy of the check with the actual offer, then submit the funds themselves once the offer has been accepted (practices may vary from state to state).

The amount of the deposit will vary according to local custom, the price of the house, the type of market you are in (competitive or not), what you can afford, among other factors. For example, in the Boston area it was common for deposits of 5 – 10% of the offer price; here in California you often see amounts of 3% or less (the law normally precludes a seller from retaining more than 3% of the purchase price as liquidated damages when 4 units or less are involved). Check with your REALTOR to see what makes sense.

Submitting an offer without a deposit may be tricky, even if the law or common practice does not require it, and is probably not going to be viewed favorably by any seller, since there is nothing that shows good faith…and it is much easier for the buyer to walk away from the deal. If you are in a position where you do not have the cash, or will be getting 100% financing (remember, the offer deposit counts as part of the overall downpayment that you may be providing and is subtracted from the purchase price to determine how much financing is required), you may be able to submit a deposit using borrowed funds that then gets returned to you at closing.

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  1. […] Make an offer – Now that you found the property you wish to purchase, you will need to make a written offer (a verbal offer is meaningless). This is done on the required state form, and you will also need to include a deposit. The offer will outline terms and conditions as well as your contingencies (commonly, buyers make offers contingent upon the mortgage and home inspection). Your REALTOR will assist you with the required paperwork and will present the offer. […]


  2. […] make a written offer (a verbal offer is meaningless). This is done on the required state form, and you will also need to include a deposit. The offer will outline terms and conditions as well as your contingencies (commonly, buyers make […]


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