How it protects your offer
When you make an offer on a home, one of the first financial steps you’ll take isn’t your down payment—it’s your earnest money deposit. This deposit plays a big role in showing the seller that you’re serious and committed to the deal.
For first-time buyers especially, earnest money can feel confusing. Let’s break it down in a clear, simple way.
What Is Earnest Money, Exactly?
Earnest money is a good-faith deposit you submit shortly after your offer is accepted. It shows the seller that you’re financially committed and intend to follow through with the purchase.
Think of it as your way of saying:
“I’m serious about buying this home.”
This money is typically held in an escrow account by a neutral third party until closing.
How Much Earnest Money Is Typical?
There’s no universal rule, but in most markets earnest money falls between:
- 1%–3% of the purchase price
- $1,500 to $10,000+ depending on home value and competitiveness
- Sometimes higher in multiple-offer situations
Your real estate agent will guide you on what’s competitive for your market and price range.
Is Earnest Money Refundable?
Yes—in most cases, earnest money is refundable if you cancel the contract for a reason covered under your contingencies.
Common refundable scenarios include:
- Inspection issues
- Appraisal coming in low
- Financing not being approved
- Title problems
If you cancel outside of these protections, the seller may keep your earnest money. That’s why timelines and contract terms matter so much.
What Happens to Earnest Money at Closing?
If everything goes smoothly, your earnest money is credited back to you at closing and applied toward:
Your down payment
Your closing costs
Or both
It’s not an extra fee—it becomes part of your purchase funds.
Best Practices for Earnest Money
- Always understand your contract contingencies
- Never wire funds without verified instructions
- Keep proof of your deposit receipt
- Work with a lender who coordinates closely with your agent
At Affinity Home Lending, we help buyers understand how earnest money fits into their full loan strategy so there are no surprises at closing.