MAKING AN OFFER
Found your dream home? It’s time to make an offer!
Once you find the right home, the next step is to make an offer. Your agent will prepare the offer and your loan officer will prepare the pre-qualification letter to match the offer. When all parties agree and sign a contract, it will get “escrowed” with a title company.
You might be thinking, “OK, got it! But what does a ‘contract being escrowed’ mean?” Great question! Typically, there is “earnest money” required in a home purchase transaction.
Earnest money, by definition, is this: money given by a buyer to a seller to bind a contract.
Think of earnest money as a form of insurance for the seller taking their home off the market to sell it to you. That may not be the technical term, but that’s basically what it is.
The seller might require anywhere from $500 to 1% of the purchase price as a deposit for them to take the home off of the market. If you breach the terms of the contract, they get to keep the money. If you don’t breach the terms of the contract and follow through with the purchase, the earnest money would count towards closing costs or down payment requirements.
That “earnest money” gets held in an escrow account at a title company of your choice. Once all parties have signed and dated the contract, it has been “executed”. Once earnest money has been delivered to the title company (along with a copy of the contract), it is considered an “escrowed contract”.
Once this occurs, your lender will need a copy of the contract to begin the loan process. You’ll also want to include a copy of the earnest money check and/or receipt from the title company.
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