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Home >> Lending >> Home Mortgage
Who Gets My Down Payment?
Who do I pay the down payment to, the lender or the seller?
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 There's no universal answer to your question, because real estate sales practices vary widely from state to state, and even sometimes within a single state. Part of your downpayment is sometimes paid in the form of an "earnest money" deposit given in order to induce the seller into signing a purchase and sales agreement. This agreement says you have a sincere interest on the property during the time it takes to address details like financing, drawing up the deed, doing the home inspection, and all the other time-consuming details. That earnest money, if you pay it, is normally held by the real estate agent.
Depending on local practice, you may or may not have to produce the balance of the downpayment at the same time. If you do, it will also be held by the real estate agent. Such payments are normally not given to the seller until the final closing of the deal.
When you have your closing appointment to sign all the mortgage documents and receive ownership of the real estate, you will be instructed to bring a certified check or a cashier's check for the total closing costs. If you have not yet made the complete down payment, it will be included in that sum. You'll be expected to have whatever check you bring made payable to the closing agent, who is usually an attorney, law firm or escrow agent.
The seller will receive a payment from the closing funds for whatever amount remains due from you, including any amount you are financing with the lender. If the real estate agent has been holding the down payment, those funds will be accounted for during the closing.
Real estate closing practices vary quite a lot from place to place. Find out as soon as possible who will be the closing agent that handles your transaction, and contact his or her office to make sure you are prepared with the right amount of money and any paperwork, including acceptable identification, you'll need for the closing.
If you have no experience in real estate transactions, you should consider hiring a knowledgeable real estate attorney to represent your interests in the transaction. Even seasoned real estate professionals often make this extra investment. The piece of mind will be well worth the cost.
Published on BankingQuestions.com 9/11/08
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