What is earnest money?
Earnest money is a deposit a home buyer pays after the seller accepts an offer, to show the offer is serious. A neutral party holds it in escrow until closing. If the sale goes through, the buyer gets it back as a credit. If the buyer breaks the contract, the seller may be able to keep it. The short version is in what earnest money is, and the old word behind it is explained in why it is called earnest money.
- Earnest money = home price x the percent you offer.
- Most deposits land between 1% and 3% of the price.
- Worked example: 2% of a $500,000 home is $10,000. The usual range on that home runs from $5,000 to $15,000.
How to calculate earnest money
earnest money = home price x percent / 100
percent = earnest money / home price x 100
Take the price in your offer and multiply by the percent. A $300,000 home at 1% is $3,000. A $500,000 home at 3% is $15,000.
To check a deposit someone has already suggested, divide it by the price. A $7,500 deposit on $500,000 is 1.5%. Every common percent has its own page in earnest money by percentage, starting with 1% earnest money.
How to use the earnest money calculator
Type the price into the calculator at the top of this page. The first tab turns a percent into dollars. The second tab turns a dollar deposit into a percent and rates it against the usual range.
- The percent buttons cover 0.5% to 10%. Type any other figure into the box beside them.
- The down payment and closing cost fields show the cash you still need at closing after the deposit is credited.
- Copy link saves your numbers in the address, so you can send them to your agent or co-buyer.
Earnest money chart
The deposit on common home prices at 1%, 2%, 3% and 5%. Each price links to a page with every percentage and the cash due at closing.
| Home price | 1% | 2% | 3% | 5% |
|---|---|---|---|---|
| $150,000 | $1,500 | $3,000 | $4,500 | $7,500 |
| $200,000 | $2,000 | $4,000 | $6,000 | $10,000 |
| $250,000 | $2,500 | $5,000 | $7,500 | $12,500 |
| $300,000 | $3,000 | $6,000 | $9,000 | $15,000 |
| $350,000 | $3,500 | $7,000 | $10,500 | $17,500 |
| $400,000 | $4,000 | $8,000 | $12,000 | $20,000 |
| $450,000 | $4,500 | $9,000 | $13,500 | $22,500 |
| $500,000 | $5,000 | $10,000 | $15,000 | $25,000 |
| $600,000 | $6,000 | $12,000 | $18,000 | $30,000 |
| $750,000 | $7,500 | $15,000 | $22,500 | $37,500 |
| $1,000,000 | $10,000 | $20,000 | $30,000 | $50,000 |
Prices from $100,000 to $2 million are on the earnest money by home price page.
How much earnest money is typical?
One to three percent of the price is the range most often quoted. PNC Bank puts it this way: in many markets, buyers can expect to put down 1% to 3% of the purchase price. No law sets the amount, and whether earnest money is required at all comes down to the contract. It is part of the offer, and the seller can accept it, counter it or turn the offer down. A deposit below 1% of the price is possible too.
Three things move it most. Competition pushes deposits up, sometimes to 5% earnest money or more. Lower-priced homes often use a flat amount. Local custom matters too, so ask your agent what sellers in the area expect. The guide on how much earnest money to put down goes through each one.
What happens to earnest money at closing?
It is credited to you. The money has been sitting with the escrow holder, and at closing it counts toward what you owe. On the Closing Disclosure it appears as a deposit that lowers your cash to close. It does not come back as a separate check unless it is more than you owe.
With 20% down and closing costs estimated at 3%, a $500,000 purchase needs $115,000. A $10,000 deposit leaves $105,000 to bring. Earnest money vs down payment shows how the two fit together.
Is earnest money refundable?
It is refundable when the contract says so. Most purchase contracts include contingencies for the inspection, the loan and sometimes the appraisal. If one of them fails and you cancel inside the deadline, the deposit normally comes back. Walking away for a reason the contract does not cover is what puts it at risk. Builder contracts often follow their own rules, covered in earnest money on new construction.
The details are in when earnest money is refundable, with short answers on a failed inspection and financing that falls through.
Who holds earnest money, and how do you pay it?
A neutral third party holds it, usually a title company or escrow company, a brokerage trust account or an attorney, and the seller does not get it while the sale is pending. Your contract names who and sets the deadline, often within a few days of acceptance (see when earnest money is due). Who holds earnest money explains each option.
Most buyers pay by wire transfer or cashier's check. Some escrow holders take a personal check, and very few take a credit card. Wire fraud aimed at home buyers is common, so confirm wiring instructions by calling a number you already know before you send anything. How to pay earnest money lists the safe steps.