How Much Earnest Money Should You Put Down on a House?

Most buyers put down earnest money equal to about 1% to 3% of the purchase price. On a $500,000 home that is $5,000 to $15,000, and the earnest money calculator works out the figure for any price and percentage.

That range is a habit of the market, not a rule. No federal law sets the amount, and whether earnest money is required at all is up to the contract. It is a number the buyer offers and the seller accepts in the purchase agreement, so it moves with local custom, competition and the terms of the deal.

What the 1% to 3% range looks like in dollars

Here is the arithmetic on a few common prices.

Home price	1%	2%	3%
$300,000	$3,000	$6,000	$9,000
$400,000	$4,000	$8,000	$12,000
$500,000	$5,000	$10,000	$15,000
$750,000	$7,500	$15,000	$22,500
$1,000,000	$10,000	$20,000	$30,000

The page on earnest money for a $500,000 house runs the same numbers at more percentages. If you think in percentages first, see what 1% earnest money comes to at different prices.

Why sellers ask for a deposit at all

Earnest money is a good faith payment. It tells the seller you are serious enough to put cash at risk while they take the house off the market.

If you follow the contract, you get the money back as a credit at closing. If you walk away for a reason the contract does not allow, the seller may be able to keep it. That is why the size of the deposit matters to both sides. The details of when you keep it and when you lose it are in the guide on when earnest money is refundable.

What pushes the amount up or down

Several things move the number. None of them sets it on its own.

Local custom

Each market has its own habits, and your agent will know them. In some places a flat dollar amount is normal. In others the deposit is tied to a percentage. Builders set their own deposit terms on new homes, which often differ from resale contracts, so read how earnest money works on new construction before signing one.

New York City is a well known high end. The New York City Bar says that when a contract is signed, the buyer typically delivers a down payment equal to 10% of the purchase price, usually held by the seller’s attorney in an escrow account. On a $500,000 apartment, that is $50,000. Buyers moving from a 1% market are often surprised by it.

Competition

In a slow market, a seller may accept 1% or less. In a bidding war, a larger deposit is one way to make an offer look stronger without raising the price. The guide to using a bigger deposit to win an offer covers that tactic and its risks.

Price

Percentages get large on expensive homes. Three percent of $1,000,000 is $30,000, which is real money to tie up for a month or two. On high priced homes, buyers often offer a lower percentage that is still a large dollar figure.

At the other end, a 1% deposit on a $150,000 home is only $1,500. Some sellers want a higher floor. If you are wondering whether going under the usual range is acceptable, see whether earnest money can be less than 1 percent.

Your contract protections

A deposit is only as risky as the contract makes it. With inspection, appraisal and financing contingencies in place, you can usually cancel for those reasons and get the money back. With fewer protections, more of the deposit is truly at stake. Think about your exit options before you pick a number.

State rules on what a seller can keep

Some states limit how much a seller can keep if a buyer defaults. California is the clearest example. Under California Civil Code section 1675, when a buyer intends to live in a home of one to four units, a deposit kept as liquidated damages is presumed valid only up to 3% of the purchase price. Above 3%, the seller has to show the amount is reasonable.

That does not cap what you can put down in California. It limits what the seller can keep as liquidated damages without proving more. Other states handle this differently, and many leave it to the contract.

How loan type affects the deposit

Your loan program does not set the deposit, but your lender will look at it.

Fannie Mae’s Selling Guide tells lenders that large earnest money deposits and deposits above what is customary for the area should be closely evaluated. If the deposit counts toward your down payment, the lender has to verify that the money came from an acceptable source, usually through bank statements and a copy of the canceled check or a receipt from whoever holds the deposit.

In practice, that means you should pay the deposit from your own account, keep the paper trail, and tell your loan officer the amount early. Money that appears in your account right before the deposit leaves will raise questions.

Where the money goes after you pay it

You don’t hand earnest money to the seller in most deals. It goes to a neutral third party, such as a title company, an escrow company, a real estate broker’s trust account or an attorney. Which one depends on the state and the contract. The guide on who holds earnest money explains each option.

Paying it is its own step with its own risks. Criminals send home buyers fake wiring instructions, and the guide on how to pay earnest money walks through how to confirm instructions before any money moves.

What happens to it at closing

If the sale closes, the deposit is yours. It shows up on your Closing Disclosure as a credit and lowers the cash you need to bring. It does not add to the cost of the house. The guide on earnest money vs down payment shows how a $10,000 deposit is counted on a $500,000 purchase.

If the sale falls apart and both sides want the money, the escrow holder usually won’t release it until both sign or a court decides. That process is in the guide to earnest money disputes.

A simple way to choose a number

1. Ask your agent what deposit is normal for that price range in that town.
2. Start from the local norm. Go higher only if you are competing and comfortable with the risk.
3. Check your contingencies and deadlines. Know which dates make the deposit nonrefundable.
4. Make sure the cash is in your own account and has been there for a while.
5. Put the number in the earnest money calculator to see the percentage, then confirm it with your agent.

For most buyers on a $500,000 home, that lands somewhere around $5,000 to $15,000. Expect a bigger number in places like New York City, and possibly a smaller one in a slow market where sellers have few offers.