Earnest Money Deposit

An overview of what earnest money deposits (EMD) are and what we may need from you if you have one

Earnest Money Deposits (EMD), also known as Good Faith Deposits, are contractually agreed upon sums of money that homebuyers typically give to sellers to demonstrate their serious intentions to purchase the property. This is typically part of negotiations and is paid within a week of signing your contract with the seller. The EMD is typically applied as a credit towards your down payment to the seller. If you paid an EMD, we will need proof of the transfer of these funds to the escrow agent.

Do I have to prove I paid an EMD?
  • If your contract does not mention an EMD and you did not make any payments to the seller up front, you do not need to prove an EMD.
  • If you paid an EMD, you will need to prove that you paid it in order to subtract this amount from your down payment.
  • If you cannot prove that you paid the EMD listed on your contract, you may be required to pay this at closing or provide an amendment to your contract that states you did not pay the EMD.
What do we need?
  • A copy of the check that you sent for your earnest money deposit (you can usually get a copy from your realtor or by logging into your bank account)
    • If you sent a wire payment instead, please send us a pdf of the wire confirmation you received over email. This should confirm the amount and the account it was sent from.
    • Make sure that the amount on the check or wire receipt matches the amount for the earnest money deposit in your purchase contract
  • Your bank statement showing the funds leaving your account.
  • If your EMD was paid by someone else who is not part of the transaction, this will be considered a gift and you will also need to provide a gift letter (see Gift Funds for more info).
Why do we need this?
  • Lenders must confirm that the earnest money deposit amount stated on the contract was paid in full in order to fulfill your contract requirements.
  • This money must be confirmed in order to make sure the Closing Costs are accurate (your EMD payment goes towards your down payment).
  • The funds must be "sourced" and "seasoned," which means that we know where the money is coming from and that it has been in the account for a minimum amount of time. This is due to Anti-Money Laundering laws in place (see Large Deposit for more info on Sourcing).

→ Continue to the next article in this series, Gift Funds

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