Earnest money is a deposit a buyer pays after an offer is accepted to demonstrate good faith, held by a third party such as a brokerage, title company or attorney rather than by the seller. The Consumer Financial Protection Bureau's homebuying guidance for buyers covers where the deposit sits in the wider transaction, alongside the loan estimate, the appraisal and closing. What happens to that money afterwards is not decided by custom, by fairness, or by anything on this page. It is decided by the purchase agreement.
Arb Digital publishes free business and property calculators, and this earnest money calculator deliberately confines itself to arithmetic. It takes the deposit your own contract specifies, expresses it against the purchase price, the down payment and the total cash you need at closing, and shows what is left to bring on the day. It publishes no customary percentage, and it makes no statement about whether any deposit is refundable, because that is a question of contract law and the answer lives in your agreement and your jurisdiction, not in a formula.
What This Calculator Does
It handles the deposit as contracts actually structure it: an initial deposit stated either as a percentage or a fixed sum, an optional second deposit due when a contingency period ends, and an optional separate fee that some markets use alongside the deposit. It then reports the total committed, that total as a share of the purchase price, how much of it is credited against the price at closing, and the cash balance you still need to fund.
That last figure is the one people miscalculate. A deposit already paid is normally credited against what you owe at closing, so the money you must wire on the day is the down payment plus closing costs minus whatever has already been credited. Budgeting the down payment and the deposit as two separate outflows double-counts, and budgeting them as the same thing when a fee is not credited under-counts.
How to Use It
- Enter the purchase price and the deposit exactly as your contract states it, either as a percentage or a fixed amount.
- Add any second deposit the agreement schedules for the end of a contingency period.
- Enter any separate option or due diligence fee and set whether your contract credits it at closing.
- Enter your down payment percentage and estimated closing costs to see the cash still due on the day.
- Take the deadlines out of the contract into your diary, because those dates govern the deposit far more than its size does.
The Formula and How It Is Calculated
The initial deposit is either price × percentage ÷ 100 or the fixed amount you enter. On a $400,000 purchase at 1.5%, that is $6,000. Adding a $4,000 second deposit and a $500 separate fee gives $10,500 committed, which is 2.63% of the purchase price.
Credited funds are the deposits plus the separate fee only if you have said the fee is credited. With the fee not credited, $10,000 is credited. Total cash to close is down payment + closing costs, or 20% of $400,000 plus $12,000, which is $92,000. The cash still due at closing is that total less the credited funds: $92,000 − $10,000 = $82,000. The committed total expressed against the cash requirement, $10,500 against $92,000, is 11.41%.
The Contract Governs, Not the Custom
Whether a deposit is returned, retained, split or litigated depends entirely on the executed purchase agreement and on the law of the place where the property sits. Agreements set out contingencies — commonly inspection, financing, appraisal and title — each with its own deadline and its own notice requirement, and the interaction of those clauses with the facts determines the outcome. Some jurisdictions cap what may be forfeited or require particular forms of notice; some contracts specify liquidated damages as the seller's sole remedy; some provide arbitration or a release procedure before funds move at all.
This page therefore takes no position on any deposit's status, and you should be wary of any page that does. The CFPB's guidance on finding the right home makes the same point from the other direction: it suggests making an offer contingent on obtaining financing and on a satisfactory inspection, so that a buyer who cannot get a loan or who finds serious defects is not contractually required to buy. Those contingencies are the mechanism, and they only work if their deadlines are observed. The people who can tell you where you actually stand are a real estate attorney licensed in the jurisdiction and, for procedure, your licensed agent or broker.
Customs Vary Widely, Which Is Why Nothing Is Preset
Deposit conventions differ between countries, between states within a country, and often between neighbouring metropolitan areas. Some markets treat a modest fixed sum as normal, some work in percentages of the price, some stage payments across contingency periods, and some use an entirely separate non-deposit fee paid directly to the seller for a defined period. Some jurisdictions place statutory limits on the amount that may be forfeited under a liquidated damages clause.
None of that generalises, and a page publishing "the typical earnest money deposit" would be wrong in most markets. Ask your agent what is customary where you are buying, read what the contract actually says, and enter those numbers here. In a competitive market a larger deposit is sometimes offered to strengthen an offer; whether that is wise depends on facts a calculator cannot see, and it is a decision to take with professional advice rather than from arithmetic.
Where the Deposit Sits in Your Total Cash
A useful way to read the output is as a cash-flow timeline rather than a single number. The deposit leaves your account within days of the offer being accepted. The balance leaves at closing, weeks or months later. Both come out of the same savings, and both need to be liquid on their own dates, which is why the share of total cash to close is worth watching — when the deposit is a large fraction of the total, an unusual amount of your money is committed unusually early.
Note also that a good-faith deposit on a purchase is a different instrument from a rental security deposit, which is governed by tenancy law rather than by a sale contract, and the two should never be reasoned about interchangeably.
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Browse All Free Tools Talk To Arb DigitalCommon Mistakes to Avoid
- Budgeting the deposit and the down payment separately — a credited deposit reduces the cash due at closing, so counting both in full overstates what you need.
- Assuming a separate option or due diligence fee behaves like the deposit — it is a different instrument, and only the contract says whether it is credited.
- Missing a contingency deadline — deposit outcomes turn on dates and written notice, and a lapsed period changes the position under the agreement.
- Wiring funds on emailed instructions — closing wire fraud is common enough that the CFPB warns about it, so confirm details by phone on a number you already had.
- Relying on what is customary elsewhere — deposit conventions and statutory limits differ by state and by country, and only local advice and your own contract apply.
Related Free Tools From Arb Digital
The down payment calculator and the closing cost calculator build the two halves of the cash-to-close figure this page nets the deposit against. The mortgage calculator and the mortgage escrow calculator cover the loan and the ongoing reserve. If you are still deciding, the rent vs buy calculator frames that question, and the cost per square foot calculator puts two properties on a comparable basis. For tenancy deposits rather than purchase deposits, use the security deposit calculator. Everything is listed in the free online tools hub.
Frequently Asked Questions
It is a deposit a buyer pays after an offer is accepted, to show good faith in performing the contract. It is normally held by a neutral third party such as a brokerage, title company or attorney rather than by the seller, and it is normally credited against what the buyer owes at closing.
This page cannot tell you, and no general page can. The outcome depends entirely on the executed purchase agreement, its contingency clauses and deadlines, and the law of the jurisdiction where the property sits. A real estate attorney licensed in that jurisdiction is the person who can answer it for your contract.
There is no universal figure, which is why the deposit is an input here rather than a preset. Conventions differ between countries, between states and often between neighbouring markets, and some jurisdictions impose statutory limits on forfeiture. Ask a licensed local agent what applies where you are buying.
Where the contract credits it at closing, the deposit reduces the cash you need on the day rather than being an additional cost. That is why this calculator nets credited funds off the total cash to close instead of adding the deposit on top of the down payment and closing costs.
Some markets use a fee paid directly to the seller alongside the deposit, buying a defined period in which the buyer may investigate the property. It is a different instrument from the deposit and is treated differently at closing. Only your contract states whether it is credited against the price.
Because many agreements stage the deposit, with a further payment falling due once an inspection or due diligence period ends. Modelling both instalments gives a truer picture of how much money is committed and when it leaves your account.
An escrow holder or stakeholder named in the contract, commonly a title company, escrow company, brokerage trust account or attorney trust account, depending on the jurisdiction. The contract and local practice determine who holds it and what procedure releases it, and funds are typically not released without agreement or a formal process.
This tool performs arithmetic on deposit figures you enter from your own purchase agreement. It publishes no customary deposit amounts, and it is not legal or financial advice. Whether a deposit is returned or forfeited is a matter of contract law determined entirely by your executed purchase agreement, its contingency clauses and deadlines, and the jurisdiction in which the property sits; customs and statutory limits vary by state and by country. Consult a real estate attorney licensed where you are buying, and your licensed agent or broker, before signing or relying on any figure here.
