What is earnest money in a home buying process?

Earnest money is a deposit made by a home buyer to show serious intent. Typically, it runs between one and three percent of the purchase price and signals good faith to the seller. This money is held in escrow and applies toward your down payment if the deal closes. If you back out without a valid contract reason, you may lose this deposit. Using earnest money wisely helps you negotiate stronger terms and protects your budget.