What Is an Earnest Money Deposit?

Earnest money is a sum of cash you pay before closing on a home, to show the seller you're serious. How does it work?

A model of a house sits on a stack of $20 bills in front of a computer.
(Image credit: Getty Images)

Getting ready to shop for a home? An important part of the home buying process is making an earnest money deposit, or “EMD.” 

Also known as a “good faith deposit,” earnest money is a lump sum of cash that you plunk down when you enter into a purchase agreement with a home seller. The deposit serves as a sign of commitment and a gesture of goodwill, since you could be required to forfeit your deposit if you try to back out of the deal without a valid reason.

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Daniel Bortz
Contributing Writer, Kiplinger's Personal Finance

Daniel Bortz is a freelance writer based in Arlington, Va. His work has been published by The New York Times, The Washington Post, Consumer Reports, Newsweek, and Money magazine, among others.