Making an offer · Phase 5
How Much Earnest Money Should You Put Down?
When your offer is accepted, you back it with an earnest-money deposit — a good-faith payment that tells the seller you're serious. The two questions every first-time buyer asks: how much, and do I lose it if the deal falls apart? Here are the answers, and how to protect the money.
The short answer. Earnest money is typically 1% to 3% of the purchase price — about $4,000 to $12,000 on a $400,000 home — and it's negotiable, running higher in competitive markets. It's held by a neutral party in escrow, not paid to the seller, and it's credited toward your down payment and closing costs at closing, so it isn't an extra cost. You get it back if you cancel for a reason your contingencies cover, within their deadlines — and you risk losing it if you walk for a reason they don't.
How much to offer
There's no fixed rule — earnest money is negotiated — but 1% to 3% of the price is the usual range. What moves you within it is how competitive the market is and how much you want to stand out:
| Purchase price | 1% deposit | 2% deposit | 3% deposit |
|---|---|---|---|
| $300,000 | $3,000 | $6,000 | $9,000 |
| $400,000 | $4,000 | $8,000 | $12,000 |
| $500,000 | $5,000 | $10,000 | $15,000 |
A simple percentage of price; amounts are illustrative, not a quote. Local norms vary.
A larger deposit makes your offer more credible — it signals you won't walk lightly — but it also puts more cash at risk. In a hot market, more earnest money can help you win; in a normal market, a standard 1–3% backed by solid contingencies is the better balance.
Where the money goes — and why it's safe
Your deposit doesn't go to the seller. It's held by a neutral third party — usually an escrow or title company, sometimes a brokerage trust account or a real estate attorney — until the deal closes or is cancelled. That neutrality is the whole point: it protects both sides. At closing, the money is applied to your down payment and closing costs. If the deal is cancelled, the contract decides who receives it.
When you get it back — and when you lose it
This is what buyers really want to know. Your earnest money is protected by the contingencies in your contract. Cancel for a covered reason, within its deadline, and you get your deposit back:
- Refundable: the inspection reveals problems you can't accept; the home appraises low; your financing is denied — each covered by its contingency, within the deadline.
- At risk: you back out for a reason no contingency covers (cold feet), miss a contingency deadline, waived the relevant contingency, or the loan failed because of something you did during underwriting.
The rule to remember
Earnest money is refundable through your contingencies and their deadlines — not automatically. Track every date in your contract, and don't make big financial moves during underwriting, or you can turn a refundable deposit into a forfeited one.
Know your full cash at the table
Your earnest money counts toward closing
See how the deposit fits into your total cash to close, alongside your down payment and closing costs — no signup.
Open the Closing Costs Calculator →Part of Phase 5 of the First-Time Home Buyer Guide. Next: the contingencies that protect this deposit and what happens if the appraisal comes in low.
Keep reading
- First-Time Buyer Questions, AnsweredThe 30 questions buyers actually ask — down payments, pre-approval, closing costs, PMI, and the first year of ownership.
- The First-Time Home Buyer GuideThe whole journey, phase by phase, with a calculator at each step.
- How Much Cash to Buy a House?Down payment scenarios, closing costs, earnest money, and reserves — worked at $300k/$400k/$500k.
Frequently asked questions
How much earnest money is normal?+
Earnest money is typically 1% to 3% of the purchase price, though the amount is negotiable and rises in competitive markets. On a $400,000 home that's roughly $4,000 to $12,000. A larger deposit signals a serious buyer and can strengthen your offer, but it also puts more of your cash at risk if you back out for a reason your contract doesn't protect. The goal is enough to be credible without over-exposing yourself.
Is earnest money refundable?+
Usually yes — if you back out for a reason covered by a contingency in your contract, and within its deadline. The standard inspection, appraisal, and financing contingencies each let you cancel and get your earnest money back if that condition isn't met. You typically lose it only if you walk away for a reason not protected by a contingency, or after your contingency deadlines have passed.
Do I lose my earnest money if my financing falls through?+
Not if you have a financing (mortgage) contingency and you're within its deadline. That contingency exists specifically so that if your loan is denied, you can cancel the purchase and recover your deposit. You put the money at risk if you waived the financing contingency, missed its deadline, or the loan fell through because of something you did during underwriting — like taking on new debt or changing jobs.
What's the difference between earnest money and a down payment?+
Earnest money is a good-faith deposit you make when your offer is accepted, held by a neutral third party (usually in escrow) to show you're serious. Your down payment is the larger sum you pay at closing. They're not extra costs stacked on top of each other — your earnest money is credited toward your down payment and closing costs at closing, so it counts toward what you owe, it isn't lost.
Who holds the earnest money?+
A neutral third party — commonly an escrow or title company, or sometimes the listing brokerage's trust account or a real estate attorney — not the seller directly. The deposit sits in that escrow account until closing, when it's applied to your costs, or until the deal is cancelled, at which point it's released to whichever party the contract entitles it to. Keeping it with a neutral party is what protects both sides.
Can I get my earnest money back after the inspection?+
Yes, if you have an inspection contingency and you act within its window. If the inspection turns up problems you're not willing to accept and you can't reach agreement with the seller, the inspection contingency lets you cancel and recover your deposit. Miss the inspection deadline, or waive the contingency, and that protection is gone.
Is offering more earnest money better?+
It can make your offer more competitive, because a bigger deposit tells the seller you're committed and unlikely to walk lightly. But it's a trade-off: the more you put down, the more is at stake if you cancel for a reason your contingencies don't cover. In a hot market a larger deposit can help you win; in a normal market, a standard 1–3% with solid contingencies is usually the better balance of credibility and protection.
Methodology
Earnest-money amounts are market norms, not statutory figures — the 1–3% range and the deposit tables reflect common practice and are shown as illustrative percentages of price, which vary by local market and contract. How the deposit is held (in escrow by a neutral third party), how it's applied at closing, and how it's protected by contingencies follow standard U.S. purchase-contract practice and CFPB buyer guidance. This guide is educational, not legal advice; your protections depend on the exact terms of your purchase agreement.
Sources
- Consumer Financial Protection Bureau — Buying a house / Owning a home — accessed 2026-07-27
- CFPB — Mortgage closing: what to expect — accessed 2026-07-27
- HUD — Buying a home (buyer basics) — accessed 2026-07-27