What Is Earnest Money, and How Does It Work?

1. Earnest Money Shows You’re a Serious Buyer

Think of earnest money as a good faith deposit. It’s usually 1% to 2% of the purchase price, and it tells the seller:

✅ You’re committed
✅ You’re not making multiple offers just to test the market
✅ You’re willing to follow through if everything checks outThe funds are submitted shortly after your offer is accepted and held safely in an escrow account.

Before making an offer, understand your complete financial picture. Calculate your Conventional Purchase Loan Payment now to see how much you’ll need for your down payment and closing costs—so you know exactly how your earnest money fits into the total.

2. The Money Goes Toward Your Down Payment or Closing Costs

Earnest money isn’t extra—it’s applied to your final costs at closing. That means:

💰 If you’re putting 5% down, and you already gave 2% in earnest money, you’ll just need to bring the remaining 3%
💼 The money is managed by a neutral third party—usually a title company or escrow officer—until the deal is completeIt’s simply money you’re paying early to show commitment.

If you’re working with limited funds for earnest money and down payment, explore low down payment options. Calculate your FHA Purchase Loan Payment now to see how 3.5% down preserves cash for earnest money deposits while still getting you into your home.

3. You Can Usually Get It Back If the Deal Doesn’t Work Out

If something goes wrong—and it’s covered by a contingency in your contract—you can typically get your earnest money refunded. That includes:

  • 🧱 A failed home inspection
  • 🏦 Loan approval falling through
  • 📉 A low appraisal

But if you back out for a reason not covered in your contract, you could forfeit the deposit. That’s why it’s critical to work with an agent and lender who help you write smart, protective contracts.

Need help finding an experienced agent who protects your earnest money with strong contingencies? Get An Introduction to trusted real estate professionals who write buyer-friendly contracts and safeguard your deposits.

Ready to get pre-approved and start making offers with confidence? Get Approved Now to know exactly how much you can offer and what earnest money you’ll need to be competitive in your market.

Wondering How Much Earnest Money You’ll Need? Let’s Break It Down

At Stairway Mortgage, we make sure you’re protected—because serious buyers deserve seriously good advice.

📘 Download our homebuyer guides with offer strategy tips.

🧮 Plan your offer with our Conventional Purchase Calculator.

🤝 Get An Introduction to buyer’s agents.

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