How Much Deposit Do I Need To Buy a House?
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Hey, good afternoon, this is Jeb Smith, Coldwell Banker Residential Brokerage here in Huntington Beach, California, and today we’re gonna do another topic video. The topic today is gonna be, how much escrow money do you need to put down in order to buy a house?
So, often when working with buyers, first-time home buyers, one of the questions that they have is, how much money do they actually need to put into escrow once a contract is agreed upon in order to open escrow? Honestly, the answer is, there’s not a set amount. There’s no predetermined amount that says that you have to put X into escrow. When you do your purchase contract with your agent when you’re buying the house, that is something that you’re gonna discuss, is how much money you wanna put down once escrow is open in order to open escrow.
So let’s start for a minute and actually talk about what an escrow deposit is or an earnest money deposit. An earnest money deposit or an escrow deposit is like a good faith deposit. So it’s money that you’re putting into an escrow account, which is a third party that’s gonna hold the money during the transaction until contingencies are released or that goes towards the closing of the property.
That money, when I say good faith, just means that you’re showing the seller, “Hey, look, I’m serious about buying your house, and with that being said, I’m willing to put, say $10,000 into an escrow account to open escrow.” That money generally is 100% refundable until you release the contingencies, your contingencies when you purchase the property.
So generally, there’s six contingencies when purchasing a property in the state of California, and until you’ve release all of those contingencies, that money that you’ve put into escrow, that earnest money deposit, is 100% refundable to you unless some of that money has been used to purchase something. So it’s not money that you should be worried about losing unless you’ve released contingencies. Now once you have released the contingencies on the property, then that money is at risk of going to the seller if you decide to back out or change your mind or what have you.
So back to the question at hand is, how much is required? Well, like I mentioned, there’s not a set amount, but as a realtor, what I generally like to recommend to a client buying a house is somewhere between two to three percent, one to three percent, somewhere in there. So if you’re buying a $500,000 house, ideally you could put somewhere between, say five and $15 grand towards an escrow deposit, an earnest money deposit.
Now in states where purchase prices are less than California, say $100,000 purchase price, you might be able to get away with $500 bucks, $1000 bucks. So it’s all gonna depend on the property price, how much you’re offering on that particular property. So on luxury listings when you have $5 million listing, the earnest money deposit’s gonna be a lot higher on something like that than say a $200,000 property.
So I hope that answers your question, but if you have additional questions, wanna know what the contingencies are, any of that stuff, I’m gonna do another video. But please reach out to me, would love the opportunity to help. Have a great day. Bye-bye.
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How much does it cost to sell a house?: https://youtu.be/v6PR1gIvIA8
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