Earnest Money: How Much Do You Need in 2026? [By State]

Q: What is the difference between earnest money and down payment?

Earnest money is a deposit showing you're serious (1-3% of price, paid when offer accepted). Down payment is your equity contribution (3-20% of price, paid at closing). Earnest money is usually applied toward your down payment at closing.

Q: Do I get earnest money back if the deal falls through?

It depends on WHY the deal fell through. You GET it back if: financing falls through (with financing contingency), inspection reveals major issues (with inspection contingency), appraisal comes in low (with appraisal contingency). You LOSE it if: you simply change your mind, you miss deadlines, you waived contingencies.

What Is Earnest Money?

Earnest money (also called a "good faith deposit") is money you put down when your offer is accepted to show the seller you're serious about buying. It's held in escrow until closing.

At closing: Your earnest money is applied toward your down payment and closing costs. It's not an extra fee—it's just paid earlier.

Typical Earnest Money Amounts by State

Market Type	Typical %	On $400K Home	Examples
🔥 Hot/Competitive	3-5%	$12,000-$20,000	CA, TX (Austin), CO, WA, FL (Miami)
📊 Normal/Balanced	2-3%	$8,000-$12,000	NC, GA, AZ, TN, VA
❄️ Slow/Buyer's Market	1-2%	$4,000-$8,000	OH, PA, MI, IL, rural areas

Earnest Money vs Down Payment

Feature	Earnest Money	Down Payment
Purpose	Show you're serious	Your equity in home
Typical Amount	1-3% of price	3-20% of price
When Paid	When offer accepted	At closing
Held By	Escrow/title company	Goes to seller
Refundable?	With contingencies	No (it's your equity)

What Happens to Earnest Money If Deal Falls Through?

✅ You GET It Back If:

Financing falls through (financing contingency)
Inspection reveals major issues (inspection contingency)
Appraisal comes in low (appraisal contingency)
Title issues discovered (title contingency)
Seller can't deliver clear title
Home sale contingency not met

❌ You LOSE It If:

You simply change your mind
You miss contract deadlines
You waived contingencies
You can't get financing (no contingency)
You fail to perform as agreed
You back out for non-covered reasons

How to Protect Your Earnest Money

Include contingencies — Financing, inspection, appraisal at minimum
Meet all deadlines — Mark them on your calendar
Get pre-approved first — Reduces financing risk
Use a reputable escrow company — Never give directly to seller
Document everything — Keep copies of all communications
Understand your contract — Ask your agent to explain every clause

Negotiating Earnest Money Amounts

Earnest money is negotiable. Here's how to handle different situations:

💡 Negotiation Tips

In a hot market: Offer more (3-5%) to stand out
In a slow market: Offer less (1-2%) to preserve cash
If you're a strong buyer: Higher earnest money shows confidence
If you're uncertain: Keep it lower, keep contingencies
Multiple offers: Higher earnest money can win the deal

Frequently Asked Questions

How much earnest money do I need?

Typically 1-3% of the home price. On a $400,000 home, expect $4,000-$12,000. Hot markets may require more.

What's the difference between earnest money and down payment?

Earnest money is a deposit showing you're serious (paid when offer accepted). Down payment is your equity contribution (paid at closing). Earnest money is applied toward your down payment.

Do I get earnest money back if the deal falls through?

It depends on why. You get it back if you have contingencies (financing, inspection, appraisal) and those conditions aren't met. You lose it if you simply change your mind.

Earnest Money: How Much Do You Need in 2026?

⚡ Quick Answer