| When earnest money is due | 1–3 business days after offer acceptance |
| Typical earnest money amount | 1%–3% of purchase price (Varies by local market conditions) |
| When down payment is due | At closing |
| Typical down payment range | 3.5%–20% of purchase price (Depends on loan type and lender) |
| Typical closing cost range | 2%–5% of loan amount (Consumer Financial Protection Bureau) |
| When closing costs are due | At closing, same day as down payment |
Three Payments, Three Different Purposes
When you make an offer on a home, you're not just agreeing on a price — you're entering a financial process that requires three separate upfront payments at different stages. Many first-time buyers arrive at the closing table surprised by how much they owe, and when. Understanding what each payment covers — and when it's due — can help you plan accurately from the start.
For a full picture of the timeline these payments fit into, see The Home Purchase Process, From Offer to Closing.
| When earnest money is due | 1–3 business days after offer acceptance |
| Typical earnest money amount | 1%–3% of purchase price (Varies by local market conditions) |
| When down payment is due | At closing |
| Typical down payment range | 3.5%–20% of purchase price (Depends on loan type and lender) |
| Typical closing cost range | 2%–5% of loan amount (Consumer Financial Protection Bureau) |
| When closing costs are due | At closing, same day as down payment |
Earnest Money: Your Signal of Serious Intent
Earnest money (sometimes called a good faith deposit) is a sum paid by the buyer shortly after an offer is accepted — typically within one to three business days. It signals to the seller that you're a committed buyer, not someone who will walk away casually. The deposit is held in an escrow account, not paid directly to the seller.
Earnest money amounts vary by local market norms and the price of the home. In many markets, 1% to 3% of the purchase price is common, though competitive markets sometimes see higher amounts.
What happens to it? If the sale closes successfully, earnest money is credited toward your down payment or closing costs. If the deal falls through, what happens depends on the contract terms. Buyers can often recover the deposit if a contingency — such as a home inspection or financing contingency — is not met. Forfeiting the deposit is a risk if you back out without a contractual basis to do so.
Earnest Money Is Not Automatically Protected
Whether you can recover your earnest money if a deal falls through depends entirely on the contingencies in your purchase contract. Without a financing or inspection contingency, backing out of the deal — even for legitimate reasons — may mean losing the deposit. Always review the contract terms with your real estate agent or attorney before submitting your deposit.
Down Payment: Your Ownership Stake from Day One
The down payment is the portion of the home's purchase price you pay out of pocket — the remainder is financed through a mortgage. It's paid at closing, not when you make an offer.
Down payment requirements depend on the loan type. Conventional loans often require 5% to 20%, while government-backed programs — such as FHA loans (minimum 3.5% with qualifying credit) or VA loans (which may require no down payment for eligible veterans) — offer alternatives for buyers with limited savings. A larger down payment generally reduces your monthly mortgage payment and may help you avoid PMI, which lenders typically require when a buyer puts down less than 20% on a conventional loan.
If you're weighing homeownership against other options, Buying a Home for the First Time: What No One Tells You at the Start covers financing fundamentals in practical terms.
Closing Costs: The Administrative Price of the Transaction
Closing costs are fees and expenses charged to finalize the mortgage and transfer ownership of the property. They are separate from — and in addition to — the down payment. Buyers typically pay closing costs on the day of closing.
These costs generally range from 2% to 5% of the loan amount, though the precise total depends on the loan size, location, and lender. Common line items include:
- Loan origination fees — charged by the lender for processing the mortgage
- Appraisal fee — covers an independent assessment of the home's market value
- Title search and title insurance — protects against ownership disputes (see Title Insurance, Escrow, and Closing Disclosure: A Plain-Language Glossary for definitions)
- Prepaid items — homeowners insurance premiums and prepaid mortgage interest
- Recording fees — government charges for registering the property transfer
Your lender is required to provide a Loan Estimate within three business days of your mortgage application, which itemizes projected closing costs. Reading a Loan Estimate Without Getting Lost in the Numbers explains which line items to scrutinize most carefully.
Earnest Money
A good faith deposit made by the buyer after an offer is accepted, held in escrow and credited toward the purchase at closing. It signals commitment and can be forfeited if the buyer walks away without a valid contractual reason.
Down Payment
The portion of the home's purchase price paid out of pocket by the buyer at closing. The remainder of the price is covered by a mortgage loan.
Closing Costs
Fees and expenses due at closing that cover the administrative, legal, and financial work required to complete the home purchase and mortgage. These are separate from and in addition to the down payment.
Escrow
A neutral third-party account that temporarily holds funds — such as earnest money — during a real estate transaction until all conditions of the sale are met.
Private Mortgage Insurance (PMI)
Insurance required by many lenders when a buyer puts down less than 20% on a conventional loan. It protects the lender, not the buyer, and adds to the monthly mortgage cost.
Contingency
A condition written into a purchase contract that must be satisfied for the deal to proceed. Common contingencies include satisfactory home inspection results and mortgage financing approval.