Differences Between Earnest Money And A Down Payment


People mistakenly think that earnest money and a house down payment in real estate are the same things. But there is multiple difference that makes them two separate issues about the house. Some of the core characteristics are different from each other.

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The payment amount is different

When someone pays earnest money, they pay up to 3 percent of the house price. This is a lower rate compared to the down payment. Usually, the general house down payment is 6%. Also, it varies from house to house. If the transaction is happening for a luxurious house, then the down payment would be different.

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A house down payment is non-refundable. As it is an initial process of a house transaction, there is usually no return of the down payment. In most cases, the earnest is not returned, as it was the Caution money. But, if the buyer can show that there is a serious issue or they did not break any contingency, the earnest money can be sent back.

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Earnest money is something that you provide to the customer to receive their trust. Also, this is a way to show the seller that you are interested to buy the house. But, when it comes to down payments, this is a formal step to buying a house legally.