Difference between Earnest Money Deposit and Down Payment
In its simplest form, the earnest money deposit is a promise to the home seller, and a down payment is a promise to the lender.
What Is Earnest Money?
Earnest money is a deposit made to a seller that represents a buyer's good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money.
What Is a Down Payment?
A down payment is a sum of money that a buyer pays in the early stages of purchasing an expensive good or service. The down payment represents a portion of the total purchase price, and the buyer will often take out a loan to finance the remainder.