DictionaryThe buying process

Earnest money: what it means

Earnest money is a deposit the buyer pays when signing the purchase contract to show good faith that the offer is serious. The seller does not keep it: a neutral third party (the title company or a closing agent) normally holds it, and at closing it is applied to your down payment or closing costs.

In Spanish it is

Depósito de garantía (earnest money)

Also written as: good-faith deposit · earnest money deposit · EMD

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Verified on October 16, 2026

1 official source

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The full explanation

If you back out for a reason the contract allows, such as an inspection or financing contingency, you get it back; if you back out without a valid reason, you can lose it.

An example

When she signs the contract, Laura hands over earnest money. Because her contract has a financing contingency, she gets the money back if the bank does not approve her loan.

You will see it in…

The purchase contract (“earnest money deposit”)
The Closing Disclosure, as a credit in your favor
The receipt from the title company holding the deposit

Words that go with it

You will rarely see this word alone. These are the ones that show up with it on the same papers.

More guides that use “earnest money”

Still confused by a paper?

A HUD-approved housing counselor can walk you through it. Agencies usually charge little or nothing, many work in Spanish, and they do not sell you anything.

What a housing counselor does See free help

Official sources

We sum up what these official sources say, in plain words. We add no rules they do not state; when a rule changes, the definition and its date change.

1. CFPB · Mortgages key terms: earnest money (external site) · in English · Verified on October 16, 2026