Definition
When you make an offer, you put down "earnest money" (usually 1-3% of the purchase price) to show you're serious. It's held in escrow by the holder named in your contract until closing, then credited toward what you owe.
Where you’ll meet it
How do I make an offer without overpaying?
See it in Buying my first home · Step 4About this term
Earnest money (typically 1-3% of the purchase price) is held in escrow and demonstrates you're serious about the purchase. It's applied toward your down payment if the sale closes. Never send earnest money directly to the seller; always use an escrow account.
Pro Tip
Don't overextend with earnest money. Use 1-2% unless the market demands more to be competitive.
Example
On a $300,000 purchase, earnest money might be $6,000-$9,000, held in escrow until closing.