What Is Ernest Money? How Much Should I Set Aside?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions.) If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. Typically, if you back out of a purchase transaction after removing conditions agreed to in your contract prior to closing, you may forfeit a percentage of your funds held in escrow.
