Introduction
When you’re buying a home, you often pay a deposit as part of your offer. This is called an “earnest money deposit.” It shows the seller you’re serious about buying the house. This deposit can help cover your down payment and closing costs when it’s time to finalize the purchase.
Sales Contract Deposit
The earnest money deposit you make when you agree to buy a house (the sales contract deposit) is a valid way to cover some of the costs when buying the house. This could include your down payment or the closing costs, which are the fees and expenses you pay to finalize your mortgage. For more on what can be used for this purpose, like if you’re using virtual currency, see another section: “B3-4.1-04, Virtual Currency.”
Verification of Source of Funds
If you’re using the deposit to help cover what you need to pay for the house (your minimum contribution), the lender must check that the money comes from a source they approve of. Another section, “B3-4.2-01, Verification of Deposits and Assets,” talks more about this.
To do this check, a form called a “Request for Verification of Deposit” (Form 1006) is used. This form should show that, over the past two months, you had enough money in your account to cover the amount of your deposit.
Your bank statements must also show that your average balance over the last two months was enough to cover your deposit. If you’re providing a copy of the check you used for the deposit to show where the money came from, your bank statements need to include the time up until the check was processed by your bank.
If the lender can’t tell for sure that the money for the deposit came out of your account, they might ask for more proof. They’ll want to see that the money actually moved from you to the seller or someone else involved in the sale, like the real estate agent, the escrow agent, or the settlement attorney. If your earnest money deposit is larger than usual or more than what’s typical in the area, it will be looked at more closely.
Documentation for Receipt of the Deposit
To show that you’ve paid the deposit, you need to provide either a copy of the check you used (showing it’s been cashed) or a written statement from the person or company holding your deposit.
Recent Related Announcements
There are updates and announcements related to earnest money deposits and other topics. For example, an announcement named “Announcement SEL-2022-04” was made on May 04, 2022. These updates can give you the latest information and changes that might affect your home buying process.
References
For more details, visit Earnest Money Deposit of the Fannie Mae Selling Guide.