Massachusetts Home Buying – Is the Purchase and Sale Deposit the Same as the Down Payment?
Being a Massachusetts home buyer is a bit different than buying in some other parts of the country. Here in Massachusetts we have a two part contract system. It consists of the “Offer to Purchase” and the “Purchase and Sale Agreement.”
Initially, at the offer stage it is customary to put a deposit of $500 to $1,000 along with the offer in order to bind the agreement.
Ten days to two weeks after the offer comes the Purchase and Sale Agreement. This is the actual complete document that will have all the terms and conditions of the sale. At Purchase and Sale signing, the buyer will put down a more substantial deposit in order for the seller to feel secure about taking the property off of the market.
The question then arises – is the Purchase and Sales deposit the same as the “down payment?”
The customary amount for the P&S deposit is equal to 5% of the purchase price you will be paying for the property. And, I would not advise putting down any more than this. There is really no reason to do so.
Unless you are in the situation with an FHA or VA loan in which you will be able to put a low down payment, 5% will not be a significant enough amount to qualify as your complete down payment. This is still merely a deposit that holds the property off of the market.
When the P&S is signed and executed, the deposit check is cashed and the funds are put into an escrow account. There they will stay there until your closing at which time this money is brought forward and applied to your purchase.
At the time of your closing you will be bringing “good funds,” usually a bank check, for the remaining amount of your down payment as well as any closing costs.
As a Massachusetts home buyer you should know – there is a definite distinction between the Purchase and Sale deposit and your down payment.
Even a first-time homebuyer can become an informed shopper, i.e. someone who understands the ins and outs of the housing market.
In fact, some of the best ways to become informed as you move along the homebuying process include:
1. Determine How Much Money You’ll Need. How much money do you have to spend on a home? Find out by getting pre-approved for a mortgage and establishing a homebuying budget.
Pre-approval for a mortgage may help you speed up your journey from homebuyer to homeowner.
And with the right homebuying budget, you’ll be able to narrow your home search to residences that fall within a set price range. Plus, you’ll be able to avoid the dangers associated with overspending for a home, along with the risk of falling behind on mortgage payments down the line.
In addition, try to determine how much you’ll need to cover the down payment, closing costs and other fees you may encounter during the homebuying process. By doing so, you’ll be prepared to manage your expenses and ensure you have enough money to purchase your dream home.
2. Evaluate a Wide Range of Houses. Although you might fall in love with the first house you view, it is important to keep in mind that the real estate market is filled with a variety of exceptional residences. Therefore, if you spend some time attending open houses and home showings, you may be better equipped to find the right home quickly.
For homebuyers, it usually is a great idea to create a list of must-haves for your house. This list will allow you to search for residences that fit specific criteria.
Furthermore, don’t forget that an informed homebuyer frequently asks questions as he or she assesses a residence. There is no such thing as a bad question to ask during an open house or home showing, and ensuring all of your concerns and queries are addressed is paramount in your quest to find the right home at the right price.
3. Collaborate with a Friendly, Experienced Real Estate Agent. When it comes to finding your dream home, who says you need to navigate the homebuying process alone? Instead, find a friendly, experienced real estate agent to guide you along the homebuying journey, and you can reap the benefits provided by a housing market expert.
Your real estate agent will serve as a key contributor in your efforts to discover your ideal home quickly and effortlessly and will help take guesswork out of the homebuying process, too.
Moreover, your real estate agent will be able to set up home showings, keep you up to date about new real estate listings in various cities and towns and provide comprehensive insights and resources into the housing market. As a result, this professional will make it simple for you to move along the homebuying process and guarantee you’re satisfied with the end results.
Be an informed homebuyer – use the aforementioned tips, and you should have no trouble purchasing your dream residence.