Earnest Money Amount: What Home-Buyers Need to Know


When you’re looking at buying a home, there are a lot of things to consider. The price is important, but also how much earnest money you’ll need to put down on the property when it’s due and more. This guide will help you understand all these details and more so that your closing process goes smoothly.

What is earnest money?

Earnest money is a deposit that the buyer pays to show their good faith in the transaction. It usually comes as a check or wire transfer to the title company or escrow company. In rare cases, it can also be cash or other collateral like an asset that’s worth at least as much as the earnest money amount.

Earnest money, or good faith deposit, is typically paid when a buyer signs a purchase agreement and serves as part of their down payment. The higher your earnest money deposit, the stronger your position during negotiations with sellers; however, having too much earnest money can cause problems if you have to back out because of financing issues or another problem with your purchase agreement later on in negotiations.

Who pays earnest money?

earnst money

The answer to this question depends on the situation. If you’re buying a home, typically you, the buyer must pay earnest money.

If you’re selling a home, the costs of your closing will be Split between all parties involved in the transaction—the buyer, seller, and lender will each pay their own share of fees and expenses.

How much earnest money should you put down?

In short, 1% of the purchase price. Or more if you want to, or less if you want to, or nothing at all sometimes. But the standard is 1%.

It’s not a law (yet), but it is widely accepted as good practice: prospective homebuyers contribute 1% of the sales price of their new home as earnest money when they submit an offer on a property they want to buy, with this payment securing their position in line for financing approval and closing date priority over other offers on that property that may come later in time.

When Is Earnest Money Due?

Earnest money is typically due at the time of signing the purchase agreement–into an escrow account–and can be used as part of the down payment on your home. The buyer is generally expected to bring a check or money order to the signing of the purchase agreement or make a wire transfer. This money is refundable in most states, but there are a few exceptions, so it’s important that buyers understand when earnest money becomes nonrefundable.

Is Earnest Money Refundable?

Let’s say you put down on a house and then backed out of the deal. Your earnest money is going to be gone. If you pull out of the Sale, the seller can keep your earnest money and spend it however they want.

However, if you do close on a home, then your earnest money goes back to you. If you back out of the home-buying process during the inspection period because the inspection reveals major damages and you have a contingency, then your earnest money is refundable.

When Can a Seller Keep Earnest Money?

While the earnest money is typically required as a deposit before closing, there are some circumstances under which the seller can keep it. For example, if you don’t close on the property or back out of the deal, they may be able to legally keep your earnest money.

Additionally, if you fail to get financing for your purchase contract, without the proper contingency, and fail to provide proof of funds (for example, an updated bank statement), your earnest money could also be at risk.

How to Protect Your Earnest Deposit

The earnest money deposit is nothing more than a gesture of good faith from both you and the seller. It shows that you are serious about buying the home and that your intent is backed by money.

If you’re buying a home, ask for a 14-day inspection period to examine the property before making a final purchase decision. This gives you time to verify that all repairs have been made as promised by the seller without having to forfeit any of your earnest money deposit.

Make sure all contingencies (conditions) are included in writing so that both parties understand what they’re agreeing upon at each step along the way—from the initial offer through closing on your new home!

Do You Get the Earnest Money Back After Closing?

At closing, the funds in the trust or escrow account get applied to the buyer’s down payment or closing costs. If you don’t want them applied, you can receive your earnest money back after closing.

Exceptions to the 1 percent rule

There are a number of exceptions to the 1 percent rule.

  • In some states, sellers may require higher or lower deposits. For example, some sellers might be willing to accept a lower deposit if they’re selling an older property that doesn’t command as high a price. Other sellers may ask for more earnest money as part of the marketing strategy for their home; this can help to set their property apart from others on the market and generate more interest in potential buyers.

On the buyer side, you may be able to negotiate with your lender for a lower amount if you have good credit (and thus want to avoid paying too much in fees), or if your income is high enough that you don’t need as much money upfront since you’re unlikely to default on your loan payments. If possible, try asking for less than 1 percent but make sure it’s still enough so that you’re not wasting time and energy negotiating something that won’t work anyway!


We hope that this post has answered some of your questions about earnest money deposits and how much you should put down. As you can see, there are a lot of different factors to consider when deciding how much to put down on your purchase. If you’re still unsure, it might be best to ask an experienced real estate agent or broker for advice.

Kurby Team

The Kurby Content Team is a diverse group of seasoned real estate experts dedicated to providing insightful, reliable information for homebuyers, real estate investors, and real estate agents. With backgrounds ranging from real estate brokerage, property investment, and residential home buying, our team combines decades of experience with a passion for demystifying the real estate world. We at Kurby are committed to helping you make informed, successful real estate decisions. Whether you're a first-time homebuyer, a seasoned investor, or a real estate professional, count on the Kurby Content Team to deliver the most relevant, actionable real estate content you need.

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