Do you remember buying toys with layaway at Toys R US? Buying a house is the same thing. Earnest money is the exact same practice. When you get your offer accepted on a house, you have 2 business days to deposit around 1% of the purchase amount to make the contract legally binding. If you don’t deposit that amount on the agreed amount time frame, you could be sued by the seller! Earnest money though is like your first down payment on the house. If you deposit 1% of the purchase price and your loan requires you to put 3.5% down at closing, you only need to bring 2.5% to closing. However, if you break the contract without cause you will loose the home you’re trying to purchase and your 1%.
