Earnest Money: How Much, When, and How to Protect It
Earnest money shows the seller you are serious. It is a deposit that goes toward your purchase — but you can lose it if you are not careful about your contract terms.
How Much to Offer
Typically 1-3% of the purchase price, though this varies by market. In competitive markets, a larger earnest money deposit can make your offer stand out. In a buyer's market, 1% is usually sufficient. Your agent can advise on what is customary in your area.
Where It Goes
Earnest money is held in an escrow account by the title company, escrow company, or the listing broker. It is not paid directly to the seller. At closing, it is applied toward your down payment or closing costs. It is your money working for you — not a fee.
When You Get It Back
If you back out within the terms of your contingencies (inspection, financing, appraisal), you get your earnest money back. If you back out for a reason NOT covered by a contingency — or after contingency periods have expired — the seller may keep it. Read your contract carefully and know your contingency deadlines.
Key Takeaways
- ✓Earnest money is typically 1-3% of purchase price and is applied to your costs at closing
- ✓It is held in escrow — not given directly to the seller
- ✓Contingencies protect your deposit — know your deadlines
- ✓Larger earnest money deposits signal a stronger commitment to the seller
Want a personalized plan?
HomeIQ Academy builds a learning path based on your situation — credit, income, savings — so you know what to focus on first.
Start Free