If you’re buying a home for sale in Scottsdale, you’ll need to come up with up-front cash for your earnest money deposit, down payment and closing costs.

Earnest Money Deposits, Down Payments and Closing Costs When You Buy a Home for Sale in Scottsdale

How much do you really need for an earnest money deposit, a down payment and closing costs, and what happens with all that cash?

What is an Earnest Money Deposit?

An earnest money deposit is money you put down to show the seller that you’re serious about buying his or her house. You don’t actually give it to the seller, though. You give it to your Scottsdale Realtor®, who then puts the money in an escrow account. (Never, ever give it directly to the seller!)

How Much is an Earnest Money Deposit?

You can expect to come up with between 1 and 3 percent of the home’s purchase price as an earnest money deposit.

What Happens to Your Earnest Money Deposit?

Your earnest money deposit is still your money until the transaction closes. In many cases, if you back out of the transaction for a valid reason and your agent has built a contingency that allows you to do so into your real estate purchase contract, you’ll get to keep your earnest money. There are some cases in which you can lose your deposit, though, so talk to your Realtor about that before you put any cash down.

In most cases, when the transaction closes, your earnest money goes toward your down payment or closing costs.

What is the Down Payment For?

Your down payment is your contribution to the home’s sales price. Your lender will pick up the rest, and you’ll make payments to your lender for the duration of your loan.

How Much Do You Need for a Down Payment?

Most lenders want you to put down about 20 percent of a home’s sales price as a down payment. If you put down less than that, you’ll most likely have to buy private mortgage insurance, or PMI. PMI protects your lender in the event that you default on your payments, and you can usually stop paying it when you’ve built up 20 percent equity in your home.

The exception is a VA loan. If you use a VA loan and put down less than 20 percent of the home’s sales price as a down payment, you won’t have to buy private mortgage insurance.

What You Need to Know About Down Payments

The higher your down payment is, the lower your monthly payments will be. That’s because you will need to borrow less from your lender. You’ll also be able to stop paying PMI sooner.

The exception is a VA loan. If you use a VA loan and put down less than 20 percent of the home’s sales price as a down payment, you won’t have to buy private mortgage insurance.

What Are Closing Costs?

Closing costs are fees you have to pay when you sign your mortgage loan agreement with your lender. Usually, closing costs are between 2 and 5 percent of the home’s total sales price. Closing costs include things like:

  • Appraisal
  • Appraisal fees
  • Attorney’s fees
  • Courier fees
  • Credit report fees
  • Discount points, if you bought them
  • Escrow fee
  • Funding fees, if applicable (such as with a VA loan)
  • Homeowners insurance
  • Inspection fees
  • Loan application fee
  • Loan underwriting fees
  • Origination fee (for the loan)
  • Pest inspections
  • Prepaid interest payments
  • Survey fees
  • Title insurance
  • Title search fees
  • Transfer taxes
  • Your first month of PMI

Are You Looking for a Home for Sale in Scottsdale?

Call us at 480-351-5359 or get in touch with us online to talk to an experienced agent about buying a home for sale in Scottsdale. In the meantime, check out our:

Don Matheson
Realtor | Founder
The Matheson Team
RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255
480-351-5359 
don@scottsdalerealestate.com