Earnest Money
Direct definition
A deposit the buyer places when making an offer, showing good-faith commitment to the transaction.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Earnest money is held in escrow and credited toward down payment or closing costs at closing. It can be forfeited if the buyer defaults outside contract protections.
Why it matters
It signals seriousness to sellers and can strengthen an offer in competitive markets.
Where you may see it
- Purchase contract
- Closing Disclosure
- Escrow instructions
A real-world example
You offer $500,000 with $10,000 earnest money; at closing, the deposit is credited toward your cash to close.
Educational and illustrative only
A common misunderstanding
Earnest money is not automatically forfeited if a deal falls through — contract contingencies often protect a buyer's right to get it back.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026