The deposit shows the seller you’re serious, and it gives them something if you walk away without a reason the contract allows. If the sale closes, it counts toward your down payment and closing costs.
How much is earnest money?
There’s no national standard. The amount is negotiable and written into the purchase agreement. Local custom, the price of the home and how much competition there is all push it up or down, and in a busy market a larger deposit can help an offer stand out.
Ask your agent what’s normal for your area and price range. A bigger deposit doesn’t cost you more if the sale closes, since it’s credited back to you, but it puts more money at risk if you back out without
Who holds earnest money?
A neutral third party, not the seller. Depending on your state and the contract, that’s usually a title company, an escrow company, a closing attorney or a brokerage’s trust account. The contract names the holder and the deadline for paying, which is usually
Pay it exactly the way the holder tells you to, and confirm any wiring instructions by phone using a number you already trust. Criminals send fake payment instructions by email at exactly this moment; read up on wire fraud before
When do you get earnest money back?
Generally when the sale falls through for a reason the contract allows and you meet its deadlines. The usual reasons are contingencies: an inspection you aren’t satisfied with, a loan that doesn’t come through, or an appraisal below the price, if your contract
The CFPB points buyers to the financing (mortgage) contingency in their contract, which says whether the deposit is refunded if the sale is cancelled because you couldn’t get a loan. Timing matters as much as the reason: most contingencies end on a set date, and after it the protection
When can you lose it?
If you back out for a reason the contract doesn’t cover, or after your contingency deadlines have passed, the seller may be entitled to keep the deposit. Many contracts make it the seller’s main remedy, though some allow
Releasing the money usually takes both parties’ signatures. When buyer and seller disagree, the holder may keep it until they settle or a court or arbitrator decides. Rules on deposits vary by state, so talk to a real estate attorney if a
Does the lender care where the deposit came from?
Yes. Because earnest money can count toward your down payment and closing costs, lenders may ask for proof of where it came from, such as a canceled check and bank statements. Fannie Mae’s guidelines call for a closer look at deposits that are large or above what’s customary
Where earnest money goes on a $400,000 purchase
| Purchase price | $400,000 |
|---|---|
| Earnest money paid at contract (example) | $8,000 |
| Down payment (10%) | $40,000 |
| Closing costs (example) | $12,000 |
| Total cash needed | $52,000 |
| Less earnest money already paid | −$8,000 |
| Left to bring to closing | $44,000 |
The deposit isn’t an extra cost. It shows up as a credit on your Closing Disclosure. The $8,000 is only an example; what’s customary
Common mistakes
- Thinking earnest money is an extra fee rather than part of your
cash to close. - Missing a contingency deadline and assuming the deposit
is still refundable. - Wiring the deposit from emailed instructions without calling
to confirm them. - Paying the seller directly instead of the holder named
in the contract.
Questions
Is earnest money the same as a down payment?
No, but it becomes part of it. You pay the deposit when the contract is signed, and it’s credited toward your down payment and closing costs
Can the seller just keep my earnest money?
Only under the contract’s terms. Usually both sides must sign a release, and if they disagree, the holder may keep the money until they settle or a court
Is earnest money refundable?
It’s refundable when you cancel for a reason the contract allows, within its deadlines. Otherwise you risk losing it, so read your contingencies
Sources
- CFPB: Do I have to sign at closing if I don’t like the terms?
- Fannie Mae Selling Guide B3-4.3-09: Earnest money deposit
- Legal Information Institute: Contingency
Written and checked by the Broker & Agent team on October 2, 2026. General information, not legal, tax or lending advice. Something out of date? Tell us.