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Is an earnest money deposit required with a USDA loan?

January 19th, 2018 by usdaadmin

What happens to your sales contract deposit with a USDA loan?

Now remember, just because USDA loans offer “No Down Payment Financing”, that is not the same as “No Money Out-of-Pocket”!

Even though 100% Financing is available with a USDA loan, it is still important to understand what a homebuyer should expect for expenses and in today’s video I will break down the details so you will be in the know.

Also, if you have not yet done so, please download our USDA Blueprint for Success with the link below, this education resource helps break down the USDA process step by step and is great for both Realtors and homebuyers alike!

Is an earnest money deposit required with a USDA loan?Tampa FL USDA Approved Lender List #1 Ranked

Typical Out of Pocket Expenses for Homebuyers

Typically, when purchasing a home, a buyer will have two sets of out of pocket expenses, a down payment and settlement charges. With a USDA 100% financing home loan, the down payment requirement is eliminated. However, additional out of pocket expenses may still apply, such as:

  • Earnest Money Deposit (EMD): Earnest money is a deposit on the house you want to buy. It is used to show sellers that you are earnest, or very serious, about buying their home.
    • USDA loans do not require any specific amount for an Earnest Money Deposit because this amount will be determined between the buyers and sellers and agreed upon within the terms of the sales contract. 
    • Also, while it is possible for this to be refunded at closing, this is dependent on several factors and is not guaranteed.  (See below)
  • Appraisal Fees and Inspections: These are customary out of pocket expenses that should be paid for by check or credit card when the option is available. Both forms of payments will allow for verification if needed.
  • Closing Costs and Pre-Paid Items: These can be financed through a USDA loan only when the appraisal is high enough to allow for the increased loan amount. Buyers can attempt to negotiate with the seller to pay towards their closing costs to help reduce this expense, but that also depends on what amount the seller is willing to negotiate, if any. Remember, if any funds are needed from the buyer at closing, the EMD will be credited towards this amount.Tampa FL USDA Approved Lender List #1 Ranked

Just to summarize, while it is possible to receive back your sales contract deposit with a USDA loan, this is not a guarantee and it will depend on other factors such as the appraised value and if the seller is paying towards any of the buyer’s settlement charges. You can review how to finance closing costs with a USDA loan here for further details.

I realize that we covered a lot today and even though not all lenders have specialize with USDA loans, because of our unique experience and expertise with the USDA program we are able to help homebuyers make the most of their qualifying ability.

#1 Sebring FL USDA Approved Lender

As a top ranked USDA Approved Lender, we are here to help!

Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 Ext. 280

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!


Don’t forget, here is the link to download our USDA Blueprint for Success

Tampa FL USDA Approved Lender List #1 Ranked

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