Earnest Money Calculator

Calculate the right earnest money deposit for your home purchase. Determine the appropriate deposit amount based on property price and percentage.

Property & Deposit Details
$
Total purchase price of the property
%
% of property price
Additional Options

What Is Earnest Money?

Earnest money is a deposit a buyer makes to show the seller that they are serious about purchasing a property. It is commonly used when buying a home and is included as part of the overall real estate transaction.

Instead of paying the deposit directly to the seller, the earnest money deposit may be held by an escrow company, title company, attorney, or another authorized party until the transaction moves forward. This helps keep the funds secure while the buyer and seller complete the agreed-upon steps.

If the purchase reaches closing, the earnest money can generally be applied toward the purchase price or other funds the buyer needs to provide at closing, depending on the purchase agreement.

If the transaction is canceled, what happens to the deposit depends on the contract terms, applicable contingencies, and local law. For example, a buyer may be entitled to receive the deposit back if a specified contingency allows the buyer to cancel the agreement. In other situations, the seller may have a right to keep some or all of the deposit.

In simple terms, home purchase earnest money is a way for a buyer to demonstrate commitment while providing a financial deposit that is handled according to the terms of the purchase agreement.

How to Calculate Earnest Money

Earnest money is a deposit a buyer typically makes when entering into a real estate purchase agreement. The amount is usually based on the property's purchase price and the earnest money percentage agreed upon by the buyer and seller.

Earnest Money Formula

    Earnest Money = Purchase Price × Earnest Money Percentage ÷ 100

Example

Suppose a property has a purchase price of $300,000, and the agreed earnest money is 2%.

    $300,000 × 2 ÷ 100 = $6,000

So, the buyer would deposit $6,000 as earnest money.

This example shows that the deposit amount depends on two key factors: the purchase price and the agreed earnest money percentage. If either one changes, the required deposit will also change.

How to Use the Earnest Money Calculator

The Earnest Money Calculator helps you quickly estimate the deposit amount based on the property price and the agreed earnest money percentage.

Step-by-Step

Step 1: Enter the Property Price, which is the total purchase price of the property.

Step 2: Enter the Earnest Money Percentage, representing the percentage of the property price agreed as the deposit.

Step 3: Click Calculate to calculate the estimated earnest money deposit.

Step 4: Review the estimated deposit amount in the results. If you enable Show Calculation Breakdown, you can also see how the deposit was calculated.

Frequently Asked Questions (FAQs)

An earnest money deposit is an amount a buyer pays after making an offer to show the seller that they are serious about purchasing the property. It is typically held in an escrow account until the transaction moves forward or closes.

To calculate earnest money, multiply the property's purchase price by the agreed earnest money percentage. For example, if a home costs $300,000 and the agreed deposit is 2%, the earnest money would be $6,000.

Earnest money is generally credited toward the buyer's down payment or closing costs when the purchase is completed. It is usually not an additional cost on top of the down payment, but the exact treatment depends on the purchase agreement.

Earnest money can be refunded in certain situations, such as when a contract contingency allows the buyer to cancel the purchase. However, the deposit may be forfeited if the buyer backs out without a contractual reason or violates the agreement.

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