What Is Earnest Money?
Earnest money is a good-faith deposit a buyer pays when making an offer on a home, showing the seller they are serious about the purchase. It is typically held in escrow and applied toward the down payment or closing costs at settlement. In most US markets, earnest money ranges from 1% to 3% of the purchase price, though hot markets may demand more.
How to Use This Calculator
Enter the home price and the earnest money percentage your contract specifies. The calculator instantly returns the deposit amount and the remaining balance of the purchase price. Adjust the percentage to compare scenarios such as 1%, 2%, or 3%.
The Formula Explained
The deposit is a simple percentage of the price: $$\text{Earnest Money} = \text{Home Price} \times \frac{\text{Percentage (\%)}}{100}$$ The remaining balance is just the home price minus that deposit. Because the deposit is later credited to your purchase, it is not an extra cost — it reduces what you still owe.
Worked Example
For a $300,000 home with a 1% earnest money requirement: $$300{,}000 \times \frac{1}{100} = \$3{,}000$$ The remaining balance is $$300{,}000 - 3{,}000 = \$297{,}000$$
FAQ
Is earnest money refundable? Often yes, if you back out for a reason covered by a contingency (inspection, financing, appraisal). Outside those, you may forfeit it.
Who holds the deposit? Usually a title company, escrow agent, or broker — not the seller directly.
How much should I offer? 1%–3% is common; a higher deposit can strengthen your offer in a competitive market.
