Buying your first home and confused by all the terms? You are not alone. Two of the biggest are earnest money and down payment, and they are not the same. In a few minutes, you will know what each one does, what typical amounts look like, and how to protect your deposit so you can write a confident offer. Let’s dive in.
Earnest money vs down payment
Quick definitions
- Earnest money is a good‑faith deposit that secures your contract after the seller accepts your offer. It is held in escrow and usually credited to you at closing.
- A down payment is your equity contribution at closing. It is part of the funds needed to buy the home and shows up on your closing statement.
Key differences
- Function: Earnest money secures the agreement. The down payment funds your ownership.
- Timing: Earnest money is paid with the offer or shortly after acceptance, per the contract. The down payment is paid at closing.
- Refundability: Earnest money can be refundable if your contingencies are not met and you follow the contract. The down payment is not refundable after closing.
More rural norms and examples
More rural areas are smaller markets where prices and competition are usually more moderate than big metro areas. That often means smaller earnest‑money deposits, though amounts still depend on price point and how competitive a listing is. In sellers’ markets, deposits tend to rise; in balanced or buyer‑friendly markets, they are often lower.
Typical earnest money ranges
- Entry‑level homes under $150,000: about $500 to $1,500.
- Typical single‑family homes from $150,000 to $300,000: about $1,000 to $3,000, or roughly 0.5% to 1.5% of price.
- Higher‑price or competitive listings over $300,000: about 1% to 3% of the purchase price, sometimes higher with multiple offers.
These are illustrative ranges. Some local brokers prefer flat amounts for lower‑priced homes.
Down payment expectations
Your down payment depends on your loan program. Many buyers use FHA with as little as 3.5% down, conventional loans with 3% to 20% down, or VA/USDA with 0% down for eligible buyers. In Lewisburg, most buyers choose the amount based on lender requirements and personal goals. Earnest money typically applies toward your funds due at closing.
Hypothetical examples
- $200,000 home: earnest money of about $1,500 (0.75%) is common. A 5% down payment would be $10,000 at closing, and your earnest money is credited toward that.
- $350,000 home with multiple offers: earnest money of about $3,500 to $7,000 (1% to 2%) can signal strong intent.
What makes earnest money refundable
Common contingencies
Contingencies are the core of refundability. Buyers commonly use:
- Inspection contingency: a time‑limited right to inspect and cancel if issues are found.
- Financing contingency: refund if you cannot secure financing within the set period.
- Appraisal contingency: refund if the property appraises below the contract price and you do not renegotiate.
- Title contingency: refund if title defects cannot be cured.
Timelines and notices
Meeting deadlines is critical. Inspection periods are often 5 to 14 days. Financing approval windows are often 21 to 30 days. You must send written notices on time and in the manner required by your contract. Keep proof, such as inspection reports and lender denial letters, to support refund requests.
Escrow and disputes
Earnest money is usually held by a title company, escrow agent, or broker trust account, as the contract specifies. If there is a disagreement, the parties may sign a mutual release, follow the escrow dispute steps in the contract, or pursue mediation, arbitration, or litigation. Exact remedies depend on your purchase agreement.
After acceptance: next steps
Delivering your deposit
- Follow contract instructions for where to send funds (title company, escrow agent, or broker trust account).
- Pay by check, wire, or cashier’s check as instructed.
- Send it promptly per the deadline in your contract.
Tracking dates
- Calendar your inspection, appraisal, financing, and title review deadlines.
- Book your inspector and speak with your lender immediately.
- Confirm how to send any contingency notices in writing.
Keep documentation
- Save inspection reports, contractor estimates, and any lender letters.
- Keep copies of all notices and emails delivered within the timelines.
- Ask your agent to confirm receipt and escrow status in writing.
Offer strategy checklist
A smart offer balances a strong signal to the seller with protection for you.
- Right‑size your earnest money for the market. Use modest amounts in balanced markets, and consider raising it on hot listings.
- Keep contingency protections, but shorten timelines to be competitive. For example, a 7 to 10 day inspection period can appeal to sellers while protecting you.
- Include a current lender pre‑approval or proof of funds with your offer.
- Offer seller‑friendly terms you can meet, such as a flexible closing date or the seller’s preferred title company.
- Use escalation clauses cautiously and set a clear cap. Be mindful of appraisal and loan requirements.
- If considering non‑refundable terms after certain milestones, review the language carefully and consult your agent and, if needed, a Tennessee real estate attorney.
Get local guidance
Every contract is different, and small wording changes can have big effects on refundability. If you want to tailor your earnest‑money amount, contingency timelines, and offer terms to any property, let’s talk. Schedule a friendly buyer consult with Ben Craig for clear next steps and a plan that fits your budget.
FAQs
Who holds earnest money in Tennessee transactions?
- Typically a title company, escrow agent, or a broker’s trust account as specified in the purchase agreement.
Is earnest money the same as a down payment?
- No. Earnest money is an early escrow deposit that usually applies to your funds at closing; the down payment is your equity paid at closing.
How quickly do I have to deliver earnest money?
- Your contract controls the deadline. It is often within 24 to 72 hours after seller acceptance.
When do I get my earnest money back?
- If you cancel within valid contingencies and meet notice rules, your earnest money should be refundable. The escrow holder will follow the contract process.
What if my lender denies my loan?
- If you have a financing contingency and provide required notice and documentation within the deadline, your earnest money should be refundable.
Can a seller keep my earnest money if I walk away?
- Possibly. If you default outside of your contingencies and the contract allows seller remedies, the seller may claim the deposit.
What happens if the appraisal comes in low?
- If the appraisal is below the contract price and you have an appraisal contingency, you can seek a price change or cancel within the deadline for a refund, per the contract.
