What Is Earnest Money in Real Estate?
- By Jim Blackburn
- on
- 100 first time home buyer FAQs
1. Earnest Money Shows You’re Serious
When you make an offer on a home, you’ll typically include earnest money—a deposit that tells the seller, “I’m committed.” It’s usually 1% to 2% of the purchase price, and it’s paid shortly after your offer is accepted. Think of it as a good faith gesture that says, “I’m not just kicking tires—I’m ready to buy.”
Strengthen your offer by showing financial readiness with same-day approval, demonstrating to sellers you can follow through on your earnest money commitment.
2. It Gets Applied to Your Final Costs
The earnest money doesn’t disappear—it’s held in an escrow account until closing. When the deal goes through, it gets applied toward your down payment or closing costs. So in the end, it’s still your money—it’s just paid up front to keep everything on track.
See how earnest money fits into your total cash needed at closing by running numbers through the FHA Purchase Loan calculator or Conventional Purchase Loan calculator.
3. You Can Get It Back (But There Are Rules)
If something major comes up—like a failed home inspection or loan issue—you can usually back out and get your earnest money refunded, as long as the reason falls within your contract terms. But if you simply change your mind or walk away for no reason, the seller may keep the deposit. That’s why it’s important to understand your contingencies and work with a trusted mortgage advisor and real estate agent who’s looking out for you.
Connect with agents who protect your earnest money through proper contingencies via our realtors and wholesalers network, and have contracts reviewed by our attorneys and title teams.
Want to Know Exactly How Much Earnest Money You’ll Need and Make Strong Offers That Protect Your Deposit?
Earnest money demonstrates commitment while contingencies protect your funds. Here’s your strategy:
💰 Budget for total upfront costs using the VA Purchase Loan calculator if you’re military or the USDA Purchase Loan calculator for rural properties
🤝 Find buyer-focused agents through our realtors network
🏛️ Protect your deposit with contract review from our attorneys and title teams
📚 Master the offer process at our buy a house page
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