Definition
A good-faith deposit made by the buyer when submitting an offer on a home, typically 1-3% of the purchase price. Earnest money shows the seller you are serious and is held in escrow until closing, when it is applied toward the down payment or closing costs. Contingencies in the purchase contract protect the buyer's earnest money if certain conditions are not met.
Related Mortgage Terms
- Closing Costs
Fees and expenses paid at the finalization of a real estate transaction, typical...
- Down Payment
The upfront portion of the home's purchase price paid in cash by the buyer. Conv...
- Escrow
A neutral third-party account that holds funds during the home purchase process ...
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
Understanding mortgage terminology helps you compare loan offers and make informed decisions. Use our mortgage calculator to see how these terms affect your monthly payment.