When applying for a VA home loan with Creekside Mortgage, Inc., it is generally advisable to put a small amount of earnest money down. The earnest money serves as a deposit to demonstrate the buyer’s commitment to the transaction. However, it’s important to note that the seller cannot keep the earnest money if the appraisal comes in low, and the VA amendatory clause further protects the veteran and their earnest money. Here’s a deeper look into the reasons for keeping earnest money amounts reasonable and the role of the VA amendatory clause.
In most cases, when the seller is paying for the veteran’s closing costs, any earnest money deposited by the buyer will be returned as a refund to the veteran. Therefore, putting down a small amount of earnest money ensures that the veteran doesn’t tie up excessive funds that could otherwise be used for other expenses related to the VA home purchase.
It’s important to understand that on a VA home loan, the seller cannot keep the earnest money solely because the appraisal comes in low. The VA amendatory clause, a document required by the Department of Veterans Affairs (VA), serves as an additional layer of protection for veterans.
The VA amendatory clause is signed by all parties involved in the transaction and essentially states that the buyer (the veteran) will not be obligated to complete the purchase if the appraised value of the property is lower than the agreed-upon purchase price. This clause safeguards the veteran from being forced into buying a home at an inflated price that does not align with its market value.
The VA amendatory clause ensures that veterans are not financially disadvantaged or burdened by purchasing a property that is overpriced. It provides the opportunity for renegotiating the purchase price based on the appraised value. If an agreement cannot be reached, the clause allows the veteran to back out of the transaction without forfeiting their earnest money deposit.
By requiring the VA amendatory clause, the VA aims to protect the interests of veterans and maintain fairness in the home loan process. It ensures that veterans are not compelled to purchase a property that is not worth the agreed-upon price, providing them with an essential safeguard during the homebuying process.
In conclusion, while putting a small amount of earnest money down is generally recommended for a VA home loan, it’s crucial to note that the seller cannot keep the earnest money if the appraisal comes in low. The VA amendatory clause, signed by all parties involved, serves as an additional layer of protection for veterans, ensuring they are not obligated to purchase a property at an inflated price. This clause protects the veteran and their earnest money, allowing for renegotiation or termination of the contract if the appraised value falls short of the agreed-upon purchase price.