What is the Earnest Money Deposit?
The Earnest Money Deposit is also known as the EMD. A deposit is normally taken when you write an offer on a home. It is not required, but highly recommended. It is unlikely that your offer will get accepted without one. There is no set amount required. In my experience, a deposit is normally about 1% of your offer price. If your offer is cash, a higher one may be requested. If you are in a multiple offer situation, you may want to consider offering a higher amount showing your serious intentions. You may want to also offer a waiver to the claim of the EMD if you do not continue with the purchase to make your offer more desirable.
Be knowledgeable of the risks involved with your deposit. You may lose the claim to your deposit if you do not follow through with your purchase. This should be explained to you when you write your offer. As a seller, you may also have claim to the buyer's earnest money deposit in certain instances. Your Realtor can explain your options.
As a buyer, this deposit does get credited to your closing amount that you need to bring at closing time. For example, if you need to bring $10,000 to closing, your $2,000 deposit will be a credit. You would therefore only need to bring $8,000 to closing. If you deposit in a rare case is higher than your funds needed for closing, you will get a credit at closing as well.
Your earnest money deposit is required to be held in a "non-interest bearing" account until your closing occurs.
Hope this explains what the earnest money deposit is when you are buying a home.
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