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WTF is Sourcing the EMD?
EMD stands for Earnest Money Deposit in real estate. It’s the good faith deposit a buyer puts up when signing an agreement to buy a house. It shows the seller the buyer is earnest in buying the home so the seller will take it off the market.
When the buyer goes for a mortgage, they are told to supply paperwork proving the money they put up when they agreed to buy the house was theirs, or from a source acceptable to a lender — mom & dad, etc. Mainly this is a requirement placed on lenders to police money movement regulations and laws — anti money laundering, anti terrorist financing, Patriot Act provisions. It also has its use in curtailing mortgage default rates. A person who has skin in the game is more likely to pay the monthly payment than one who doesn’t.
The paperwork needed is generally a copy of the cancelled check, or wire confirmation along with the buyer’s bank statement showing the funds withdrawn from their account.
Where it can get annoying, for the buyer, is when there are transfers or deposits into that same account during the same period. Then the buyer must provide statements from all the originating accounts showing those funds were their own. Often, when buying a home, buyers will bundle up their cash into one account in preparation to spend it on the down payment of the home at the closing. No problem, just keep all the statements showing the flow of the money into that account.
