What Is an Earnest Money Deposit?

When you’re ready to make an offer on a home, you should prepare to pay an Earnest Money Deposit. This payment strengthens your offer and demonstrates that you’re serious about moving forward with the purchase.

What Earnest Money Is (and Why It Matters)

An earnest money deposit is a sum of money you include with your purchase offer to show sincerity and intent. It acts as a financial “promise” that you plan to buy the home if your offer is accepted. The amount varies based on the market, price range and local norms. In some cases, sellers may require a minimum deposit to accompany your offer. Your real estate agent can guide you on what’s typical in your area and what amount positions your offer competitively.

PRO TIP

Because it’s an out‑of‑pocket expense, plan to include earnest money in your Spending and Savings Plan before beginning your home search.

Your earnest money is not an extra charge. If you owe money at closing, the deposit is applied toward your total amount due. Otherwise, the deposit is refunded back to you.

GOOD TO KNOW
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As long as you follow the terms of your contract and your contingencies are satisfied, your deposit remains protected. However, if you decide not to move forward with the purchase for reasons not covered by your contract contingencies, you could forfeit your earnest money deposit entirely or face legal issues.

Once your offer is accepted, your earnest money is safely held while you move into the next important step: scheduling your home inspection.

Learn more by signing up for our free homebuyer education course!
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