MortgageMath US

Mortgage glossary

Earnest money

The deposit that tells a seller your offer is serious.

By the Editorial team Last reviewed 1 min read

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, 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).

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.

Sources

  1. CFPB: Mortgage key terms (earnest money)

Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.

First-time buyersHow to buy your first home, step by stepTwelve steps from checking your credit to getting the keys, with the deadlines that matter.5 min readBuying a homeClosing costs for buyers, line by lineEvery section of the Loan Estimate explained, state transfer and mortgage taxes, and how to pay less.6 min readGlossaryClosing costsLender fees, third-party services, taxes and prepaids you pay at closing, on top of the down payment.1 min readGlossaryCash to closeDown payment plus closing costs, minus your deposit and credits: the amount you bring to closing.1 min readGlossaryOrigination feeThe lender’s charge for processing, underwriting and funding your loan, shown in section A.1 min readGlossaryDiscount pointsAn upfront fee paid to the lender at closing to buy a lower interest rate.1 min readGlossaryLender creditMoney from the lender toward closing costs, in exchange for a higher interest rate.1 min readGlossaryPrepaid itemsInterest, insurance and taxes paid at closing ahead of their due dates (section F of the Loan Estimate).1 min readGlossaryTitle insuranceInsurance against title problems from before your purchase; lenders require their own policy.1 min readGlossaryRecording feeThe government charge to record your deed and mortgage in the public land records.1 min read

On this page

  1. Quick answer
  2. When you get it back, and when you don’t
  3. How much, and where it shows up
  4. Related terms
  5. Sources

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