Earnest Money: What It Is, How It Works, and How Much You Need in 2026

A home buyer's earnest money is a deposit the buyer pays to show the seller they're serious about buying their house. It's usually held in escrow until the deal is done.

Author: Carl Smithers

Published on: 3/9/2026|11 min read

Fact Checked

Author: Carl Smithers|Published on: 3/9/2026|11 min read

Fact Checked

Key Takeaways

You give the seller earnest money when they agree to your offer on a house. This shows that you really want to do the deal.
A good faith deposit is usually between 1% and 3% of the house's price. But in places where there is a lot of competition, that number could go up.
You don't have to pay anything extra for your earnest money. At the end of the deal, you'll need this money to pay for the closing costs or the down payment.
Your deposit will be safe if the sale doesn't go through for a reason that is covered by the contract. For example, getting a loan, an appraisal, and an inspection of the home will all keep your deposit safe.
Your deposit will be held by a title company or escrow agent who is not involved in the sale until the closing. But the buyer and seller can't get to it until then.
The seller can keep all of your earnest money if you change your mind about the deal for a reason that isn't in the contract.
You can find out how much of a down payment you need and make sure your money is safe if you work with a lender and a real estate agent who know what they're doing.

What Is Earnest Money?

A home buyer gives the seller earnest money, which is a cash deposit, after the seller agrees to the buyer's offer. You might hear it called an earnest money deposit (EMD) or a good-faith deposit. No matter what you call it, the goal is the same. It lets the seller know you're not just looking around. You really mean it.

This is what most people don't get right away. When a seller agrees to your offer, they take their home off the market. They stop making appointments for showings. In most cases, they stop considering backup offers. That costs them time and maybe other buyers as well. Your earnest money pays them for that risk. The seller keeps the deposit if you leave without a good reason. That deposit will go right toward your closing costs or down payment if everything goes as planned.

This idea has been around for hundreds of years. People in medieval England would give each other a "earnest penny" or "God's silver" to seal a deal. The law hasn't changed much since then. A buyer puts money on the line to show they mean it, and both sides benefit from the deal. The buyer gets a deal that is set in stone. The seller knows for sure that the buyer won't waste their time.

As a home buyer, earnest money is one of the first real financial commitments you make. It comes before your down payment, before your closing costs, and usually within a few days of your offer being accepted. And if you've done your homework and included the right contingencies in your contract, your deposit will be safe the whole time.

How Earnest Money Works

The process is pretty straightforward once you know the steps. You find a home you want. You write a purchase offer that includes an earnest money deposit amount. The seller considers your offer, and if they accept, you've got a contract.

From there, you typically have one to three business days to deliver your deposit. The money goes to a neutral third party. Not to the seller. Not to the real estate agent. It goes into an escrow account managed by a title company, escrow agent, or sometimes a real estate attorney, depending on your state. The Consumer Financial Protection Bureau describes earnest money as "a deposit a buyer pays to show good faith on a signed contract agreement to buy a home." That money sits in escrow throughout the entire closing process, which usually takes 30 to 60 days.

During that window, the home goes through inspections, the appraisal happens, and your mortgage lender works on finalizing your loan. If every step checks out and you make it to the closing table, your earnest money gets credited toward your down payment or closing costs. It's not an additional expense. It's money that was already earmarked for the purchase.

At AmeriSave, we see this play out regularly with home buyers who are going through financing for the first time. They worry that earnest money is some separate fee they'll never see again. It's not. Think of it as a reservation deposit that eventually becomes part of your home purchase. The escrow agent keeps it safe until closing day, and then it gets applied where you need it most.

One thing worth knowing. You can deliver your deposit by personal check, cashier's check, or wire transfer. Wire transfers have become common, but wire fraud is a real concern in real estate. Always verify the wiring instructions directly with your title company before sending money electronically. Don't rely on email alone.

How Much Earnest Money Should You Pay?

There's no legal requirement for a specific amount, and no single number fits every deal. That said, most earnest money deposits land between 1% and 3% of the home's purchase price. According to the National Association of REALTORS®, deposits can range from 1% to as much as 10% depending on local customs and how competitive the market is.

Let's put that in real numbers. The National Association of REALTORS® reported that the median existing-home sales price reached $396,800 as of January. On a home at that price point, here's what different deposit levels look like.

At 1%, you'd put down $3,968. At 2%, that number rises to $7,936. And at 3%, your deposit comes to $11,904. In a slower market where homes sit on the market for weeks, the lower end of that range is usually fine. But in competitive markets where multiple offers come in on the same property, a stronger deposit can make your offer stand out.

A couple of factors drive the amount. First, local customs matter. Some markets expect 1% as standard. Others expect 3% or more. Your real estate agent will know what's typical in your area. Second, competition matters. If you're up against five other offers, a higher deposit signals that you've got financial skin in the game. Third, the property price plays a role. Higher-priced homes may warrant a larger dollar amount but a lower percentage.

My advice? Don't overthink it, but don't undershoot it either. A deposit that's too small can make a seller think you're not committed. A deposit that's too large puts more of your cash at risk if something goes sideways. Your AmeriSave loan officer and real estate agent can help you land on the right number for your situation.

Earnest Money vs. Down Payment

People confuse these two all the time, and it makes sense. Both involve handing over money before you own the home. But they serve different purposes and happen at different points in the process.

Your earnest money deposit happens early. Right after your offer gets accepted. It goes into an escrow account and sits there until closing. The purpose is to show the seller you're serious.

Your down payment happens at closing. It's the portion of the home's purchase price you pay upfront, minus whatever your mortgage covers. Depending on the loan type, that could be anywhere from 3% to 20% or more of the purchase price.

Now here's where they overlap. According to Fannie Mae's Selling Guide, the earnest money deposit is "an acceptable source of funds for both the down payment and the closing costs." So when closing day arrives, your earnest deposit gets rolled into those totals.

Let's walk through an example. Say you're buying a $400,000 home with a conventional loan and a 5% down payment. Your total down payment is $20,000. If you already put down $8,000 in earnest money, you'd only need to bring $12,000 more to the closing table for the down payment portion. That $8,000 isn't gone. It's already working for you.

At AmeriSave, we make sure buyers understand this distinction before they start writing offers. Knowing how these two pieces fit together helps you plan your cash flow and avoids last-minute surprises at closing.

How to Protect Your Earnest Money Deposit

You're putting real money on the line. Protect it. The single most effective way to do that is through contingencies in your purchase agreement. Contingencies are conditions written into the contract that let you back out and get your deposit back if certain things go wrong.

Include the Right Contingencies

A home inspection contingency lets you walk away if the inspection turns up problems the seller won't fix. A financing contingency protects you if your mortgage falls through. An appraisal contingency kicks in if the home's appraised value comes in lower than the purchase price and you can't reach an agreement with the seller. A title contingency covers you if legal issues, like liens or ownership disputes, surface during the title search.

These aren't optional extras. They're your safety net. Without them, you're gambling your deposit on everything going perfectly. And in real estate, something unexpected almost always comes up.

Use Escrow — Always

Never hand your earnest money directly to the seller. Always route it through an escrow account managed by a title company, escrow agent, or real estate attorney. That third party exists specifically to protect both sides of the deal. The Consumer Financial Protection Bureau notes that earnest money is held by "a seller or third party like a real estate agent or title company." If a seller ever asks you to pay them directly, that's a red flag.

Watch Your Deadlines

Your contract includes deadlines for inspections, loan approval, and other milestones. Miss a deadline and you might accidentally waive your contingency protections. Keep a calendar. Set reminders. Stay on top of every date in your purchase agreement.

Get Everything in Writing

Verbal agreements don't hold up when money is on the line. Every conversation about deposit amounts, contingency deadlines, or contract changes should be documented in writing. This protects you if there's ever a dispute about who gets the deposit.

When You Can Get Your Earnest Money Back

Good news. In most situations where the deal falls apart through no fault of your own, you get your deposit back. The Consumer Financial Protection Bureau states that "if the contract is terminated for a permissible reason, the earnest money is returned to the buyer." Here are the most common scenarios where that applies.

The home inspection reveals serious problems. Cracked foundation, mold, faulty wiring, a roof that's about to fail. If your contract has an inspection contingency and the seller won't make repairs or negotiate, you walk away with your deposit.

Your mortgage doesn't get approved. Sometimes financing falls through despite your best efforts. A financing contingency covers this. You tried, the numbers didn't work, and your deposit comes back.

The appraisal comes in low. If the home appraises for less than you offered and the seller won't budge on price, an appraisal contingency lets you exit the contract. Your deposit is returned.

Title issues come up. Liens, boundary disputes, or ownership problems found during the title search can kill a deal. With a title contingency, your money is protected.

Some states also give buyers a specific window to cancel, often around three business days after signing the contract. This varies by state law, so check with your real estate agent or attorney about what applies to you.

When You Might Lose Your Earnest Money

This is the part nobody wants to think about, but it matters. If you back out of a deal for a reason that isn't covered by a contingency in your contract, the seller can typically keep your deposit. Simple as that.

Cold feet aren't a contingency. Neither is finding another house you like better. If you change your mind without a contractual safety net, your earnest money is forfeited. And depending on the contract terms, the seller could potentially pursue additional damages beyond just keeping the deposit.

Missing deadlines is another way to lose your money. Say your contract requires you to complete the home inspection by a certain date and you don't schedule it in time. That missed deadline could void your inspection contingency. Now if you try to back out because of inspection issues, you might not have the contractual protection to get your deposit back.

Some buyers in competitive markets waive contingencies to make their offers more attractive. That strategy can work, but it's risky. Without an inspection contingency, you're committed even if the inspector finds problems. Without a financing contingency, you're on the hook even if your lender says no. Waiving contingencies is a calculated move, and you should only do it with a clear understanding of what you're putting at risk.

My view on this is straightforward. The deposit exists to protect both sides. If you keep your commitments and your contingencies are in place, you've got very little to worry about. Problems happen when people rush through contracts or skip the protections they need.

Putting Earnest Money Into Practice

Let's run through a realistic scenario so you can see how all of this fits together.

Consider a first-time home buyer in the Midwest looking at a $350,000 home. Their real estate agent recommends a 2% earnest money deposit based on local market conditions. That comes to $7,000. The buyer is getting a conventional loan through AmeriSave with a 5% down payment, which means the total down payment is $17,500.

The seller accepts the offer. Within two days, the buyer sends a $7,000 cashier's check to the title company, and the funds go into escrow. Over the next 45 days, the inspection goes smoothly, the appraisal comes in at $355,000 (above the purchase price, which is good), and the mortgage gets approved.

At closing, the buyer's $7,000 earnest money deposit gets credited toward the $17,500 down payment. So the buyer only needs to bring $10,500 more for the down payment, plus their share of closing costs. The earnest money did exactly what it was supposed to do. It secured the deal, and it reduced what the buyer owed at the table.

Now flip the scenario. Same buyer, same home, but the inspection reveals the HVAC system needs a $12,000 replacement. The buyer and seller can't agree on who covers the cost. Because the buyer included an inspection contingency, they exercise their right to cancel the contract and get the full $7,000 deposit back. Then they move on to the next property. No money lost.

That's the beauty of a well-structured offer. The contingencies did their job.

The Bottom Line

Earnest money is one of the first financial steps in home buying, and it doesn't have to be complicated. Put down a reasonable deposit, protect it with the right contingencies, and let it work toward your down payment or closing costs at closing. Know what your contract says. Watch your deadlines. And never hand money directly to a seller. If you're getting ready to buy and want to know exactly how earnest money fits into your specific loan scenario, AmeriSave can walk you through the numbers before you ever write an offer.

Frequently Asked Questions

The amount of earnest money you put down is usually between 1% and 3% of the price of the home. For a $400,000 home, that's between $4,000 and $12,000. The exact amount will depend on how competitive the offer needs to be and where you live. Sellers may want higher deposits in hot markets where there are a lot of bids because they show that the buyer is serious. Your real estate agent can help you figure out how much you need. AmeriSave's team can help you see the big picture so you can understand how earnest money fits into your mortgage prequalification.

No. You put down earnest money when your offer is accepted to show that you really want to buy. The down payment is the larger sum you pay at closing as your first investment in the home. These are two different promises, but when the sale is done, your earnest money will go toward your closing costs or down payment. This means that the deposit lowers the amount of money you need to bring to the closing. You can learn more about the down payment requirements for different types of loans at AmeriSave.

Yes, if the deal falls through for a reason that is covered by a contingency in your purchase contract, it usually does. Common reasons that are protected include a failed home inspection, a low appraisal, a denied mortgage, or title problems. If you cancel the contract for a good reason, the Consumer Financial Protection Bureau says that earnest money will be returned. But you could lose your deposit if you don't have a backup plan. AmeriSave can help you figure out what you need to do to get your loan back on track.

When you close, your earnest money deposit will be used for your down payment or closing costs. No extra charge. If you put down $20,000 and already put down $5,000 in earnest money, you would need to bring $15,000 more to the closing. The escrow agent handles the transfer, and you can see the credit on your closing disclosure document. You can use AmeriSave's mortgage calculator to figure out how much your total costs will be and where the earnest money fits in.

A neutral third party holds your earnest money in an escrow account. Usually, this is a title company, an escrow company, or a real estate lawyer, depending on where you live. The money stays in that account until the deal is done or the contract is broken. Don't give the seller earnest money directly. The third party makes sure that the money is only given out as agreed in your purchase agreement. AmeriSave's Resource Center has detailed guides that show you how to buy a home.

Not if your purchase agreement says you can get a loan. If your mortgage application is turned down, this clause protects your deposit even though you did everything you could to get it. Without a financing contingency, the seller may be able to keep your deposit. That's why it's so helpful to get a prequalification from AmeriSave before you make an offer. It helps you understand better what you can afford and makes it more likely that your loan will be approved before you sign.

You can, but it's dangerous. In a competitive market, your offer might look better if you don't include things like an inspection or appraisal. But this means you can't get your deposit back if those problems happen. According to the National Association of REALTORS®, deposits can be between 1% and 10%. Stronger offers usually have higher deposits and fewer requirements. Talk to your agent and the AmeriSave loan officer before you make that choice.

It usually happens between one and three business days after the seller agrees to your offer. The deadline is clearly stated in your purchase agreement. If you don't meet this deadline, your contract might not be valid, or the seller might be able to sell to someone else. Before you make an offer, make sure you have the money. If you're still looking into your financing options, AmeriSave can help you get prequalified. This way, you'll be ready when the right house comes along.

Most of the time, earnest money is not legally required in residential real estate deals, but it is standard practice. Some sellers won't even look at an offer unless there is a deposit of earnest money. The National Association of REALTORS® says that some sellers might not look at offers that don't include a deposit. If you don't have one, your position could be weaker, especially in a market where there are competing bids. Find out how to make a competitive offer with AmeriSave's prequalification tool.

When a deal falls through, earnest money disputes happen when the buyer and seller can't agree on who should get the deposit. The escrow agent can't give the money to either party until they both agree or a court says so in most states. The rules in some states are not the same as those in others. For example, in North Carolina, the deposit has to be kept in an escrow account with a lawyer or broker. Talk to a real estate lawyer if you have a problem with someone. AmeriSave has tools that can help you plan ahead and get off to a good start with buying a home.

Key Takeaways
What Is Earnest Money?
How Earnest Money Works
How Much Earnest Money Should You Pay?
Earnest Money vs. Down Payment
How to Protect Your Earnest Money Deposit
When You Can Get Your Earnest Money Back
When You Might Lose Your Earnest Money
Putting Earnest Money Into Practice
The Bottom Line
FAQs

What Is Earnest Money? A home buyer gives the seller earnest money, which is a cash deposit, after the seller agrees to the buyer's offer. You might hear it called an earnest money deposit (EMD) or a good-faith deposit. No matter what you call it, the goal is the same. It lets the seller know you're not just looking around. You really mean it. This is what most people don't get right away. When a seller agrees to your offer, they take their home off the market. They stop making appointments for showings. In most cases, they stop considering backup offers. That costs them time and maybe other buyers as well. Your earnest money pays them for that risk. The seller keeps the deposit if you leave without a good reason. That deposit will go right toward your closing costs or down payment if everything goes as planned. This idea has been around for hundreds of years. People in medieval England would give each other a "earnest penny" or "God's silver" to seal a deal. The law hasn't changed much since then. A buyer puts money on the line to show they mean it, and both sides benefit from the deal. The buyer gets a deal that is set in stone. The seller knows for sure that the buyer won't waste their time. As a home buyer, earnest money is one of the first real financial commitments you make. It comes before your down payment, before your closing costs, and usually within a few days of your offer being accepted. And if you've done your homework and included the right contingencies in your contract, your deposit will be safe the whole time. How Earnest Money Works The process is pretty straightforward once you know the steps. You find a home you want. You write a purchase offer that includes an earnest money deposit amount. The seller considers your offer, and if they accept, you've got a contract. From there, you typically have one to three business days to deliver your deposit. The money goes to a neutral third party. Not to the seller. Not to the real estate agent. It goes into an escrow account managed by a title company, escrow agent, or sometimes a real estate attorney, depending on your state. The Consumer Financial Protection Bureau describes earnest money as "a deposit a buyer pays to show good faith on a signed contract agreement to buy a home." That money sits in escrow throughout the entire closing process, which usually takes 30 to 60 days. During that window, the home goes through inspections, the appraisal happens, and your mortgage lender works on finalizing your loan. If every step checks out and you make it to the closing table, your earnest money gets credited toward your down payment or closing costs. It's not an additional expense. It's money that was already earmarked for the purchase. At AmeriSave, we see this play out regularly with home buyers who are going through financing for the first time. They worry that earnest money is some separate fee they'll never see again. It's not. Think of it as a reservation deposit that eventually becomes part of your home purchase. The escrow agent keeps it safe until closing day, and then it gets applied where you need it most. One thing worth knowing. You can deliver your deposit by personal check, cashier's check, or wire transfer. Wire transfers have become common, but wire fraud is a real concern in real estate. Always verify the wiring instructions directly with your title company before sending money electronically. Don't rely on email alone. How Much Earnest Money Should You Pay? There's no legal requirement for a specific amount, and no single number fits every deal. That said, most earnest money deposits land between 1% and 3% of the home's purchase price. According to the National Association of REALTORS®, deposits can range from 1% to as much as 10% depending on local customs and how competitive the market is. Let's put that in real numbers. The National Association of REALTORS® reported that the median existing-home sales price reached $396,800 as of January. On a home at that price point, here's what different deposit levels look like. At 1%, you'd put down $3,968. At 2%, that number rises to $7,936. And at 3%, your deposit comes to $11,904. In a slower market where homes sit on the market for weeks, the lower end of that range is usually fine. But in competitive markets where multiple offers come in on the same property, a stronger deposit can make your offer stand out. A couple of factors drive the amount. First, local customs matter. Some markets expect 1% as standard. Others expect 3% or more. Your real estate agent will know what's typical in your area. Second, competition matters. If you're up against five other offers, a higher deposit signals that you've got financial skin in the game. Third, the property price plays a role. Higher-priced homes may warrant a larger dollar amount but a lower percentage. My advice? Don't overthink it, but don't undershoot it either. A deposit that's too small can make a seller think you're not committed. A deposit that's too large puts more of your cash at risk if something goes sideways. Your AmeriSave loan officer and real estate agent can help you land on the right number for your situation. Earnest Money vs. Down Payment People confuse these two all the time, and it makes sense. Both involve handing over money before you own the home. But they serve different purposes and happen at different points in the process. Your earnest money deposit happens early. Right after your offer gets accepted. It goes into an escrow account and sits there until closing. The purpose is to show the seller you're serious. Your down payment happens at closing. It's the portion of the home's purchase price you pay upfront, minus whatever your mortgage covers. Depending on the loan type, that could be anywhere from 3% to 20% or more of the purchase price. Now here's where they overlap. According to Fannie Mae's Selling Guide, the earnest money deposit is "an acceptable source of funds for both the down payment and the closing costs." So when closing day arrives, your earnest deposit gets rolled into those totals. Let's walk through an example. Say you're buying a $400,000 home with a conventional loan and a 5% down payment. Your total down payment is $20,000. If you already put down $8,000 in earnest money, you'd only need to bring $12,000 more to the closing table for the down payment portion. That $8,000 isn't gone. It's already working for you. At AmeriSave, we make sure buyers understand this distinction before they start writing offers. Knowing how these two pieces fit together helps you plan your cash flow and avoids last-minute surprises at closing. How to Protect Your Earnest Money Deposit You're putting real money on the line. Protect it. The single most effective way to do that is through contingencies in your purchase agreement. Contingencies are conditions written into the contract that let you back out and get your deposit back if certain things go wrong. Include the Right Contingencies A home inspection contingency lets you walk away if the inspection turns up problems the seller won't fix. A financing contingency protects you if your mortgage falls through. An appraisal contingency kicks in if the home's appraised value comes in lower than the purchase price and you can't reach an agreement with the seller. A title contingency covers you if legal issues, like liens or ownership disputes, surface during the title search. These aren't optional extras. They're your safety net. Without them, you're gambling your deposit on everything going perfectly. And in real estate, something unexpected almost always comes up. Use Escrow — Always Never hand your earnest money directly to the seller. Always route it through an escrow account managed by a title company, escrow agent, or real estate attorney. That third party exists specifically to protect both sides of the deal. The Consumer Financial Protection Bureau notes that earnest money is held by "a seller or third party like a real estate agent or title company." If a seller ever asks you to pay them directly, that's a red flag. Watch Your Deadlines Your contract includes deadlines for inspections, loan approval, and other milestones. Miss a deadline and you might accidentally waive your contingency protections. Keep a calendar. Set reminders. Stay on top of every date in your purchase agreement. Get Everything in Writing Verbal agreements don't hold up when money is on the line. Every conversation about deposit amounts, contingency deadlines, or contract changes should be documented in writing. This protects you if there's ever a dispute about who gets the deposit. When You Can Get Your Earnest Money Back Good news. In most situations where the deal falls apart through no fault of your own, you get your deposit back. The Consumer Financial Protection Bureau states that "if the contract is terminated for a permissible reason, the earnest money is returned to the buyer." Here are the most common scenarios where that applies. The home inspection reveals serious problems. Cracked foundation, mold, faulty wiring, a roof that's about to fail. If your contract has an inspection contingency and the seller won't make repairs or negotiate, you walk away with your deposit. Your mortgage doesn't get approved. Sometimes financing falls through despite your best efforts. A financing contingency covers this. You tried, the numbers didn't work, and your deposit comes back. The appraisal comes in low. If the home appraises for less than you offered and the seller won't budge on price, an appraisal contingency lets you exit the contract. Your deposit is returned. Title issues come up. Liens, boundary disputes, or ownership problems found during the title search can kill a deal. With a title contingency, your money is protected. Some states also give buyers a specific window to cancel, often around three business days after signing the contract. This varies by state law, so check with your real estate agent or attorney about what applies to you. When You Might Lose Your Earnest Money This is the part nobody wants to think about, but it matters. If you back out of a deal for a reason that isn't covered by a contingency in your contract, the seller can typically keep your deposit. Simple as that. Cold feet aren't a contingency. Neither is finding another house you like better. If you change your mind without a contractual safety net, your earnest money is forfeited. And depending on the contract terms, the seller could potentially pursue additional damages beyond just keeping the deposit. Missing deadlines is another way to lose your money. Say your contract requires you to complete the home inspection by a certain date and you don't schedule it in time. That missed deadline could void your inspection contingency. Now if you try to back out because of inspection issues, you might not have the contractual protection to get your deposit back. Some buyers in competitive markets waive contingencies to make their offers more attractive. That strategy can work, but it's risky. Without an inspection contingency, you're committed even if the inspector finds problems. Without a financing contingency, you're on the hook even if your lender says no. Waiving contingencies is a calculated move, and you should only do it with a clear understanding of what you're putting at risk. My view on this is straightforward. The deposit exists to protect both sides. If you keep your commitments and your contingencies are in place, you've got very little to worry about. Problems happen when people rush through contracts or skip the protections they need. Putting Earnest Money Into Practice Let's run through a realistic scenario so you can see how all of this fits together. Consider a first-time home buyer in the Midwest looking at a $350,000 home. Their real estate agent recommends a 2% earnest money deposit based on local market conditions. That comes to $7,000. The buyer is getting a conventional loan through AmeriSave with a 5% down payment, which means the total down payment is $17,500. The seller accepts the offer. Within two days, the buyer sends a $7,000 cashier's check to the title company, and the funds go into escrow. Over the next 45 days, the inspection goes smoothly, the appraisal comes in at $355,000 (above the purchase price, which is good), and the mortgage gets approved. At closing, the buyer's $7,000 earnest money deposit gets credited toward the $17,500 down payment. So the buyer only needs to bring $10,500 more for the down payment, plus their share of closing costs. The earnest money did exactly what it was supposed to do. It secured the deal, and it reduced what the buyer owed at the table. Now flip the scenario. Same buyer, same home, but the inspection reveals the HVAC system needs a $12,000 replacement. The buyer and seller can't agree on who covers the cost. Because the buyer included an inspection contingency, they exercise their right to cancel the contract and get the full $7,000 deposit back. Then they move on to the next property. No money lost. That's the beauty of a well-structured offer. The contingencies did their job. The Bottom Line Earnest money is one of the first financial steps in home buying, and it doesn't have to be complicated. Put down a reasonable deposit, protect it with the right contingencies, and let it work toward your down payment or closing costs at closing. Know what your contract says. Watch your deadlines. And never hand money directly to a seller. If you're getting ready to buy and want to know exactly how earnest money fits into your specific loan scenario, AmeriSave can walk you through the numbers before you ever write an offer.