A deposit you put down when your offer is accepted, showing you're serious. Held in escrow and applied toward your down payment or closing costs at closing.
Earnest money (sometimes called a "good faith deposit") is the cash you put down when a seller accepts your offer. It signals to them that you're serious about following through. Typically it's 1–3% of the purchase price, though in competitive markets it can run higher.
The money doesn't go to the seller directly — it sits in escrow with the title company or a neutral third party until closing. At closing, your earnest money is applied toward your down payment or closing costs.
You generally get it back if the deal falls through for reasons covered by your contract contingencies (financing falls through, inspection finds major issues, appraisal comes in low). You can lose it if you walk away for reasons not covered by contingencies, like just changing your mind.
Example
You offer $400,000 on a home and the seller accepts. You write a $4,000 earnest money check (1%) that goes into escrow. At closing, that $4,000 gets credited toward your closing costs or down payment.
Also known as
earnest money deposit, EMD, good faith deposit