Earnest Money Deposit
A good-faith cash deposit a buyer puts down when offering on a home, typically held in escrow until closing.
Earnest money signals to the seller that the buyer is serious. In most markets it runs 1%–3% of the purchase price, though in competitive situations it can be higher. The check or wire is held by a third party, usually the title company or listing brokerage, not delivered to the seller.
If the deal closes, earnest money is credited toward the buyer's cash to close. If the deal falls apart for a reason the contract protects (failed inspection, low appraisal, loan denial within deadlines), the buyer gets it back. If the buyer simply walks away outside their contingencies, the seller usually keeps it.
Earnest money is also a source of documented funds for underwriting. Once it clears your account and lands in escrow, the lender will trace it as part of your asset documentation and credit it against required cash at closing.
Related terms
Other terms you'll see alongside Earnest Money Deposit
The signed contract between buyer and seller that defines the terms of a real estate sale.
The total amount of money the borrower must bring to the closing table in certified funds.
A lender-managed account that holds funds for property taxes and homeowner's insurance, paid in monthly with your mortgage.
The portion of a home's purchase price the buyer pays out of pocket up front, with the mortgage covering the rest.
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