Buying A House: Additional Funds Due at Closing
On the first page of the purchase contract there is a section that defines your purchase price, your “down payment” and your earnest deposit, and/or anything else you wish to stipulate.
Section 1c to be exact, provides for all of these. You first define your purchase price, or the full amount you’re willing to pay for the property. Below that, you include how much money you’re willing to put up as a deposit on the transaction to show the seller that you’re serious about purchasing the property. This amount is released to you at close of escrow for the purpose of fulfilling a portion of the purchase price, plus closing costs.
The third line is often used to define the down-payment. On a contract, I typically don’t write “down-payment.” Instead, something on the lines of, “Additional funds due at close of escrow.”
When you open escrow after the contract is ratified by the seller (assuming all parties agree to all terms of the purchase contract and all parties have signed,) your earnest deposit goes to the escrow company, which you’ve chosen prior to writing the contract. They issue you a receipt, and they hold this money through the escrow period. You receive a receipt, and begin your 10-day inspection period (in most cases.) Short sales are a bit different, depending on how the seller has instructed you.
When it comes time to close, you bring the difference, or the “Additional funds due at close of escrow” to fulfill your promise on the down-payment. Below is an example of Section 1c for a house with a purchase price of $100,000.00, a 3.5% down-payment, and an earnest deposit of 1.5% of the purchase price. Lines 9, 10, and 11 should add up to the purchase price in line 8.