What Is an Earnest Money Deposit? EMD Explained Simply

Transcript

Lightly edited from the video for readability.

Hi. I'm Matt Demorest, owner of HomeSure Lending, and we're going to talk about earnest money deposit checks or that check you write to make a deposit on a house. So we get asked a lot of times, what's an earnest money deposit check? Because the thing gets called a lot of different names, it's the check you write to make a deposit on a house. Usually, it's in the 1 percent range.

So for every hundred thousand dollars of house you buy, it would be 1000 dollars. That check is what in the seller of the house's mind secures you as a buyer and makes you look serious. That money goes from you to your real estate agent's office and then gets held and credited to you at closing as part of your down payment. It's really important to do this the right way though. If you're getting a gift, you're going to want to watch the video at homesurelending dot com slash faq.

Getting a gift is a whole another process and you can get a gift for the deposit, we have to document it right. So reach out to us so we do it the right way. 1 very common mistake, and it's actually something real estate agents tell our clients to do a lot of times, is to use a cashier's check. Cashier's checks are not a good way to go. The reason for that is cashier's checks can be purchased with cash, they can be purchased from an account, they can be purchased by third-party, so it's hard for the underwriter to be able to verify that that's actually your money.

You're going to want to use a personal check. Personal checks are the number 1 way that we're going to be able to verify that that money came from your account. And you're also going to want to write it from the account that you are using as assets for the transaction. Whatever account you use for the earnest money deposit check will need to be fully documented with the underwriter. As far as, you know, how to get us the documents or what type of format we need, please watch the video at homesure lending dot com slash FAQ called how to get us documents and it'll explain what we're going to need.

But for the earnest money deposit check, we will need transaction histories from your bank from the date the last statement ended through that check clearing, and we give specific advice there on how to do that. For us, every single part of this process is important and getting it right from the start helps avoid issues and headaches for you. So that's why we wanted to fully explain this part. Our goal is always to help you purchase with confidence and refinance with ease.