Process

Earnest Money

Earnest money is a good-faith deposit you put down when your offer is accepted, showing the seller you're serious. It's usually held in escrow and applied toward your down payment or closing costs at closing. If the deal falls through for a reason your contract protects, you can often get it back.

When a seller accepts your offer, earnest money signals you intend to follow through. It’s typically a percentage of the price and goes into a neutral escrow account, not the seller’s pocket. At closing, it isn’t an extra cost, it gets credited toward your down payment or closing costs.

Whether you get it back if things fall apart depends on your contract’s contingencies. Common protections cover issues like the inspection, appraisal, or financing not working out within set deadlines. Walk away outside those protections, though, and you could lose the deposit. Your real estate agent and contract spell out exactly how yours is protected.

Related terms

Escrow

Escrow has two meanings in a home purchase. Before closing, it's a neutral account that holds your earnest money and documents. After closing, an escrow account is where your lender collects part of your payment each month to pay property taxes and insurance for you when they come due.

Closing Costs

Closing costs are the fees you pay to finalize your home purchase, on top of your down payment. They include lender fees, title and escrow charges, an appraisal, and prepaid items like taxes and insurance. Closing costs commonly run roughly 2% to 5% of the purchase price, though it varies by location and loan.

Pre-Approval vs. Pre-Qualification

A pre-qualification is a quick estimate of what you may borrow, based on info you share. A pre-approval goes further: the lender verifies your credit, income, and assets, so it carries more weight with sellers. Think of pre-qualification as a starting point and pre-approval as the stronger, documented version.

Last updated: June 5, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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