Short Answer:

Earnest money is a good-faith deposit that potential homebuyers put down when making an offer on a home. It shows sellers that you’re serious about buying the home, and it typically becomes part of your down payment at closing. In most cases, you can get it back if the deal falls through for reasons outlined in your contract, but you may forfeit it if you back out for reasons not protected by contingencies.

How much earnest money do I need? 

When you find a home you love, earnest money can demonstrate your commitment to buying it. It’s typically equal to 1%–3% of the purchase price¹ and is paid shortly after your offer is accepted. This deposit reassures the seller that you’re moving forward with confidence and gives you a little extra credibility in a competitive market.

The money doesn’t go to the seller right away, however. It’s safely held in an escrow account until closing, where it will usually be applied toward your down payment or closing costs. 

Why does earnest money matter?

For sellers, it reduces risk. And for buyers, it builds trust and strengthens your offer. In a multiple-offer situation, a strong earnest money deposit can help make your offer more appealing than the rest.²

But just as important: Earnest money protects your investment in the process. It ensures that while you do your due diligence—like completing inspections, securing financing, and finalizing your plans—the home is taken off the market and reserved for you.

When is earnest money refundable?

Most real estate contracts include contingencies—conditions that must be met for the transaction to move forward. If something doesn’t go as expected, these protections can help you reclaim your deposit. Refundable situations typically include:

• Home inspection issues: If major or unexpected problems are found during the inspection process and the seller won’t negotiate repairs or price adjustments.
• Appraisal gaps: If the home appraises for less than the agreed-upon price and negotiations fall through.
• Financing challenges: If your loan is denied despite a good-faith effort to secure financing.
• Title concerns: If ownership issues arise and can’t be resolved.

These safeguards are one reason partnering with experienced mortgage and real estate professionals is so valuable—they can help you navigate these moments with confidence.

When can earnest money be forfeited?

Earnest money is only at risk when a buyer walks away from the deal outside the terms of the contract. Examples could include:

• Changing your mind after contingencies are removed
• Missing contract deadlines without agreed extensions
• Deciding to pursue a different property with no protected reason

The key here is to stay aligned with your contract and communicate quickly if anything changes.

Set yourself up for success

Buying a home is one of life’s most exciting milestones—it’s where your next chapter begins. Earnest money is just one way the homebuying process ensures both buyers and sellers are all-in and working toward the same goal.

With the right preparation and a clear understanding of your protections, you can move confidently from offer to ownership. 

No matter where you are in your homebuying journey, a good first step is to become a PremierBuyer™.³ This offers a better idea of what you can afford and can help you look more attractive to sellers by proving you are both serious about a prospective purchase and likely to be able to financially follow through. Wintrust Mortgage offers an online application to become a PremierBuyer™ that’s fast, easy, and secure.