Qualifying & process

Earnest money

A good-faith deposit — often 1–3% of the price — a buyer puts down with an offer, held in escrow and credited toward the purchase at closing.

Sources

What does earnest money mean?

Earnest money signals to a seller that your offer is serious. Held in escrow, it is typically 1–3% of the purchase price and is credited toward your down payment and closing costs when the deal closes. If you back out for a reason covered by a contract contingency — a failed inspection or a low appraisal — you usually get it back; walk away without cause and you may forfeit it to the seller.

How much, and where it goes

Earnest money is commonly 1% to 3% of the price — $4,000 to $12,000 on a $400,000 home — though it varies by market and can be higher in competitive areas. You usually deposit it with a title company, escrow agent or attorney within a few days of signing the contract.

At closing it is credited toward your down payment and closing costs, so it is not an extra cost if the sale goes through.

When you get it back — and when you don’t

You generally get it back if you cancel under a contingency in the contract, such as inspection, appraisal or financing, within the stated deadline.

You generally lose it if you back out for a reason the contract does not cover or miss a contingency deadline.

Wire it only after confirming instructions by phone with the escrow holder — earnest-money wires are a common fraud target.

Frequently asked

Do I get my earnest money back?

Usually yes if you back out for a reason covered by a contract contingency — a failed inspection, a low appraisal, or financing that falls through. Walk away without a valid contingency and you may forfeit it to the seller.

How much earnest money should I put down?

Commonly 1–3% of the purchase price, though in competitive markets buyers offer more to strengthen an offer. It is credited toward your down payment and closing costs at closing, so it is not an extra cost — just paid earlier.