Mortgage glossary
Earnest money
Definition: Earnest money is a good faith deposit a buyer makes after signing a purchase contract, held by the title company and usually applied toward the down payment or closing costs at closing.
The amount is negotiated in the contract and varies with price and market conditions. If the buyer backs out for a reason not allowed by the contract, the seller may be entitled to keep it. If the deal closes, it is credited to the buyer.
Texas purchase contracts commonly include an option period, bought with a separate option fee, during which the buyer can terminate for any reason. Earnest money and the option fee are different payments. Lenders will ask for proof of where the earnest money came from, so keep the bank statement showing the withdrawal.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
Ready when you are.
Start your full application in about 10 minutes, or call and talk to a real person on the team.
Not ready to apply? See your options in 60 seconds