Profile picture for harrymeans

Earnest Money Refund Question

I already have a pre-approval, and I am going to submit an offer today on a house and am putting $1000 earnest money deposit.  If for some reason my loan isn't approved, do I get the earnest money back?

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August 08 2008 - US
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In your contract, you should have a mortgage contingency or commitment date which allows you some time to arrange financing while protecting your earnest money.   Depending on how long it will be before to actually close, the amount of time could be anywhere for 15 days to a month.

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August 08 2008
Profile picture for harrymeans

it says i have 5 days to submit an apllication, i already have, but I don't know how easy it is to get a pre-approval compared to the final approval.  I'm just wanting to cover my bases, so as long as I do everything I can to get a loan, they won't keep my deposit.

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August 08 2008

Don't take the 6.75% Harry.  Rates dropped again today.

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August 08 2008
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He may be a Bronco, and Rockies fan, but you should listen to him Harry.

 

Looking forward to those ribeye's Nic

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August 08 2008
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your killing me...... I'm past that, I feel comfortable right now minus this whole earnest deposit thing. 

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August 08 2008
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Shoulf

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August 08 2008
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oops

 

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August 08 2008
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The

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August 08 2008
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The

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August 08 2008
Profile picture for harrymeans

Ok fixed that problem of spacebar hitting enter too.  So, here is what I am worried about, I my job time of 1 year 10 months in a commissioned based business, and I they said my total back ???  is 54% I think, so now im stressed again.  Ugh, I wish I would have known how stressfull all of this would be in the beginning

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August 08 2008

Hey harry.

 

No reason to have cold feet.

 

As far as the 'earnst money' goes, generally you will lose that if you back out.

 

If the seller breaks his contract, or something is wrong with the house that they didnt disclose prior to the contract, then you can.

 

Ask your agent if you can sign the contract 'contingent upon home inspection' .

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August 08 2008
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So, if I can't get the loan I lose the money?  Further more, my LO left out of town till Tuesday so I can't talk to him and his boss said he would look into this and call me back, but he is the one who first told me about this 50+% back thing and then said that banks like it to  be way less.  I just don't like the feeling of not knowing whats going on.

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August 08 2008
Profile picture for Rob Cochems

harry,

 

Make sure you have a loan contigency, when you put in the offer.  Ask for a two week loan contigency, if your escrow will be 30 days.  If you find out within those two weeks that the deal cannot be done, you get your deposit back.

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August 08 2008

Harry...Did this guy run your scenario through any type of automated underwriting system?  He should have before offering you anything especially with the job issue out and in the forefront.  A 54% backend can be of some concern

 

Tom.....99.9% of the sales contracts that I have seen have some sort of "mortgage contingency" in them giving the buyer some time to arrange for financing without losing any earnest money.

 

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August 08 2008
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according to my LO he ran through the automatd underwriting system and then called the underwriter to make sure he was figuring the income correctly.  The preapproval was for 180,000 and were looking at a sales price of 155000.  ok, im a little more calm now, talked to the real estate agent, if for any reason the loan is not approved i get my emd back. 

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August 08 2008

There will be a date in the contract.  Just make sure you are all set by that date including having your appraisal done and reviewed. 

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August 08 2008
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it says 5 days to submit a full loan application, when i talked with the REA he said that on the front page of the offer, it states this offer is contingent upon buyer getting approved for a 30 year FHA loan. which it does say, but it doesnt say by when.

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August 08 2008

jcaf , rob

 

great points.

 

Harry. I have never seen a client ask for a loan contingency for financing in a long time. The sellers would never go for that. To be honest, it defeated the point of earnst money. All the buyer would have to do is get the lender to 'reject' the financing so he could have the earnst money back. 

 

 Contracts I have seen the buyer loses the earnest money if he cannot get financing. But if these guys are saying you can , I would certainly go for it. Times are changing .

 

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August 08 2008
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I don't know anymore, im just going to assume none of this makes sense because its the las vegas area and things are wacky these days. i give up

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August 08 2008
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Tom,

 

The last purchase I did the escrow was for 30 days and it had a 30 day loan contingency.  Basically the earnest money never became hard.

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August 08 2008

Harry...It is crazy these days.  Make sure that appraisal is ordered as soon as the contract is finalized.  If you lender is sending this loan out of state, you may run into someone who is not familiar with the market in Vegas.  Just what they read.  You want to have as much time as possible to address any concerns someone may have with the value.

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August 08 2008

Harry. Dont give up.

 

You are fine. What you are tap dancing around in now is the 'fine print' . Your loan officer should be looking out for you here and giving you advise.

 

I didnt catch your last post before I posted. It seems clear to me that you have the contingency build right into the contract. If that contingency includes returning the earnst money to you, you are fine.

 

No worries.

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August 08 2008

If you're working with an attorney, he/she should keep an eye on your contingencies.  If it looks like an approval is taking longer, he/she should request an extension.  From a legal standpoint, you will need to meet all the contingencies on the agreement on the dates they're required to protect your earnest money. 

 

On a related note, the concept of earnest money is antiquated and really has no place in today's lending environment.  Financing is just too hard to come by to require this.  I just went to a closing where the seller's agent required the borrower to place his entire down payment ($60k) in an escrow account three weeks prior to the actual closing date.  Why they did that is beyond me.  All they kept telling me was that it was customary in that area.  Goofy!

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August 08 2008

John.

 

Great point. In todays enviroment, I would at least get APPROVED for a any loan -contingent upon the house itself and appraisal and inspection, before I put down a nickels worth of earnst money.

 

As long as I was approved for the loan up to a certain dollar amount and time frame , and the house appraised and met inspection, I would have no problem with a small earnst.

 

 

 

 

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August 08 2008

But, again, what's the point of the earnest?  Is a few thousand dollars, which if properly contracted for is easily refunded, a good measure of a serious buyer on a several hundred thousand dollar purchase?  I don't know...I just think it's an arcane concept. 

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August 08 2008

I agree with you John. Its always been a better concept in a sellers market so buyers dont waste the sellers time . But in a buyers market like this, you would think they are happy to get any contract at all.

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August 08 2008

Harry, most of what was said here is right when it comes to the earnest money.  If your loan falls through through no fault of your own, the earnest money is returned back to you.  Look on your contract, talk to your agent, they will tell you the same.  In addition, IF for some reason they do not let you out with your earnest money because your approval falls through, use the inspection to get out of it!

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August 08 2008
 
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