# Earnest money

> Earnest money is the deposit you pay when you sign a purchase contract. Who holds it, when it’s refunded, when you can lose it and how it’s credited.

URL: https://mail.mortgage-math-us.com/glossary/earnest-money/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**Earnest money** is a deposit a buyer pays after signing a contract to buy a home, to show good faith. The seller or a third party such as a title company, escrow agent or broker holds it, and if the sale closes it goes toward your down payment or closing costs.

## When you get it back, and when you don’t

The purchase contract decides. If the contract ends for a reason it allows, such as a failed financing, appraisal or inspection [contingency](https://mail.mortgage-math-us.com/glossary/contingency/), the deposit is generally refunded. If you back out without such a reason, or miss a contract deadline, the seller may be entitled to keep it. Each contingency has its own deadline: once it passes, walking away on those grounds can cost you the deposit, so put the dates in your calendar the day you sign.

## How much, and where it shows up

No federal rule sets the amount; local custom and negotiation do, and a larger deposit can make an offer stronger in a competitive market. Pay it to the holder named in the contract, never to a person who emails new payment instructions, and keep the receipt. Your lender may ask you to document where the money came from, since it counts toward the funds you need to buy (see the [step-by-step buying guide](https://mail.mortgage-math-us.com/first-time-buyers/step-by-step/)).

At closing, the deposit appears on page 3 of the Closing Disclosure under amounts “Paid Already by or on Behalf of Borrower at Closing,” which lowers your [cash to close](https://mail.mortgage-math-us.com/glossary/cash-to-close/).

## Related terms

- [Closing costs](https://mail.mortgage-math-us.com/glossary/closing-costs/), which the deposit can help cover
- [Home inspection](https://mail.mortgage-math-us.com/glossary/home-inspection/), the most common reason buyers use a contingency

## Sources

- [CFPB: Mortgage key terms (earnest money)](https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/)

_General information, not financial advice._