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Question: Is ernest money the same as a down payment when buying property?

(Posted by: on 2011-11-11 09:20:10)

We have been living in a "Lease with option to buy " house for seven years now. The agreement was during making our lease payments a small part of the money would go towards the down payment, so when and if we decided to buy this house we would have it saved. We have now been approved for a mortgage of 68000.00 which is the selling price. The sellers have been paid 8800.00 over the time we have lived here and they have it recorded in their records, with the terms being if we did not purchase the place or could not be approved for a loan then they would keep the down payment money as rent paid. We are planing on adding money to the $8800.00 to bring it up to a 15 % down payment. Problem is now the mortgage company wants all of the down payment to go through them and the owners/ landlord do not have the cash that we have paid to them to be used. They assumed when we actually did purchase the property then the loan would show that we had already made the down payment. So would what we have paid already be considered ernest money and how can we show this to the bank that it has been prepaid? The person we are working with on this has told me that the bank will not approve this kind of transaction and it needs to be paid up front but I don't know how to make this happen. Would what we have paid be considered ernest money? And if so how does that work? Any suggestions on what we can do? Yes we have a realtor involved in this and if it comes down to it the seller will lower the actual purchase price. That would mean it would lower the price to 59200.00 then we would have to pay another down payment of 8880.00. We have the money in our savings to do this but had originally planned to use this for improvements on the property. We are just trying to get this done the way we had originally planned.

Posted by: Huntsman on 2011-11-11, 09:24:31

There is a reason lease to own is illegal in some states It never, ever turns out well He spent your money - he simply does not have it He will have to knock $8,000 off the appraisal value of the home You might need a lawyer to help you out

Posted by: Cathy on 2011-11-11, 09:36:31

Do you have a Realtor involved? I would get one right away. Where is your signed contract when you made this agreement? Did you get a real estate attorney involved when you made this agreement? Until you do anything else you need real estate advice, your signed contract from the agreement and the money to cover all of that plus the earnest money! Please get the law on your side now, before you make another move or even tell the owners/ landlord what you are doing. You can tell everyone "considering the circumstances we will have to wait at least two more months ". They will pretend they want to know why. Tell them you need to raise more money.

Posted by: Chris B on 2011-11-11, 09:43:05

I hope you mean "earnest money. " All the money to be used for your down payment should have been held by a third party or in an escrow account. Now, you need to convince the seller to reduce the asking price accordingly. They assumed and you assumed!!! Yup, that's what happens when you don't do your homework properly.

Posted by: Mr Placid on 2011-11-11, 10:06:06

Find another mortgage company, because the persons working at this mortgage company are obviously idiots. Your lease/ option has a sales price, correct? Something like "lessee has option to buy property for $100,000 prior to December 2011. " Great. So, you get a mortgage that reflects a 15% down payment, i.e. an $85,000 mortgage. The $85,000 goes to seller. Seller agreed that your $8800 counts toward the sales price. So, that leaves an extra $6200 that you must come up with to buy the house. What's so hard about that? The answer: Nothing is hard about that at all. If your proposed lender can't figure this out, then find a new lender.