Reserves, Earnest Money, and Down Payments

[mixer99]

Hi all!

 

I am about to contract to build a new home that will require a 5% earnest money deposit that will = about $30,000. So, I have the following questions:

 

-Can I convert the earnest money to a 5% downpayment that is required for conventional, when the time comes to close on the mortgage?

-I know earnest money can count as a reserve. Can I 'double count' the earnest money as my PITI reserves as well?

-Credit mid scores will be 720+, so no worries there.

 

Thanks for your help!

[Brian B The Loan Professor]

The earnest money usually converts to part of the down payment

You cannot double dip - if you use it for down payment it is gone and no longer available for you if an emergency pops up -

 

Hope this helps

Brian

[mixer99]

Hi Brian,

 

It's been years! Thanks for fetching this one...one last question: for PITI, I am JTROS on my mom's CDs, Savings, Annuities, and other 'stuff'. However, I'm married and will be mortgaging with my wife. Am I allowed to count the joint stuff with my mother towards Reserves?

[Brian B The Loan Professor]

yes you should be able to use those funds for reserves

[mixer99]

yes you should be able to use those funds for reserves

Thanks again, Brian!