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Originally Posted by NoSoup
For what it's worth, earnest money is money that you basically put towards the purchase of the house at the time of the offer to prove to the current owners that you're serious about the offer.
A word of caution - if the deal goes south, you don't get you money back. Because of this, I would recommend putting down the least amount of earnest money possible - sometimes as little as $100.00.
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That's not always true. It depends on why the deal didn't go through. If the SELLER backs out, or if the house doesn't pass inspection or something like that then you WILL get your earnest money back. If you (as the BUYER) back out, or the loan doesn't go through then you may not get your earnest money back (that's why it's a good idea to get qualified BEFORE making an offer).
If you don't put enough money down as earnest a lot of people won't take you seriously and may reject your offer ... so it's a judgment call. I usually think of it as money going toward the down-payment anyway.
With regard to PMI ... I hate it, but it's the "cost" of buying a house without a 20% down-payment. I usually go with the lesser of two evils ... can I get a 20/80 loan and if so, what will the interest be on the 20% part? If it's MORE than PMI then I would go with PMI and a 100% loan. If interest is LESS than PMI then go for the 20/80 (if you and the house qualify for it). It depends on your credit score, the property itself (multi-family homes usually DON'T qualify for 20/80) and other factors such as if the mortgage broker or bank are in a good mood or not.
