What Is Earnest Money? How Much Should I Set Aside?

Posted on: Wed, 05/20/2009 - 20:01

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What Is Earnest Money? How Much Should I Set Aside?

Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount. This is why you need to put escape clauses in the contract.

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by cmitchell
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Posted on: Wed, 09/02/2009 - 15:33 #1

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cmitchell,

Thanks for the information on earnest money and the importance of putting "out clauses" in the purchase contract. It is like the old saying of hope for the best, but plan for the worst. Believe and Achieve! - Joe

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