Mortgage Loan

A mortgage loan is a loan used to buy real estate in which the property secures the debt. If the borrower does not repay, the lender can take the home through foreclosure. Most buyers borrow most of the price and pay the rest in cash.

Earnest money comes from the buyer's own funds, not the mortgage. The lender may ask where the deposit came from and look for it on bank statements, so keep the receipt. Ask your lender first if the money is a gift, and read whether earnest money can be a gift.

The loan also decides how the deposit is used at closing. On a $500,000 home with a $400,000 mortgage, the buyer needs $100,000 down plus costs, and the earnest money already paid counts toward it. If the loan falls through, the financing contingency decides what happens to the deposit.