va loan

Earnest Money Requirements

What is earnest money?

Earnest money, often known as a “good faith deposit,” demonstrates to the sellers that you are committed to buying their house. 

The home is taken off the market after a seller accepts an offer, enters into a purchase agreement, and receives the earnest money deposit.

A few things to note about the earnest money

  • It is your money and the seller does not keep it unless you failed to meet your requirements listed in the contract.
  • The money can be used at closing towards your closing costs and down payment if you are making one.
  • The amount of earnest money depends on the area. It an be anywhere from 1% to 3% of the purchase price. Your realtor should be able to help provide guidance on this subject.
  • The money does not go to the seller. It should go to the attorney or escrow/title company assigned to the file.

Is earnest money a requirement for a VA Loan?

The earnest money has nothing to do with VA loans, it is a requirement placed by the seller or the listing agent to have a valid purchase contract.

By doing this, you show the seller that you are a serious buyer and are prepared to close on the house.

Therefore, even if you finance the property with a VA loan, the seller may still want the earnest money, and in some states, it is actually a requirement to provide an earnest money in order to have a valid purchase contract.

If you do provide earnest money, the VA loan has specific requirements regarding the sourcing of where the money came from.

Is Earnest Money Refundable With A VA Loan?

As previously mentioned, earnest money deposits give sellers a good faith gaurantee that the buyer is sincere in purchasing the home.

Consequently, the seller will keep the earnest money as compensation if a buyer cancels a deal that is in violation of the purchase contract.

The majority of the purchase contract, however, contains a number of milestones or contingenices that allow buyers to back out of a deal without losing their earnest money.

In other words, you receive a full refund of your deposit if you cancel apurchase in accordance with these contingency terms.

Here are some of the contingencies typically mentioned in a contract:

  • Home Inspection

As a buyer, you have the right to cancel the contract if the home inspection reveals any severe problems.

In this scenario, the buyer would receive their earnest money deposit back.

  • Appraisal

If the appraisal comes back lower than the purchase price, the buyer can cancel the contract or renegotiate with the seller to lower the purchase price.

If the seller isn’t willing to lower the purchase price, then the buyer can receive the earnest money back.

  • Loan approval for the mortgage

The contract typically mentions a timeframe for when the buyer is required to get a mortgage loan approval.

If the loan comes back with problems like a denial, the buyer can cancel the contract and get their earnest money back.

Buyers – please read your contracts and confirm with your realtor to make sure you have these contingencies in place.

When the market is hot some buyers may waive their contingencies to get their offers accepted.

If contingencies are waived, the buyer may not be able to get earnest money back for the contingency that was waived.

More info about this here: How to Get your Offer Accepted in a Seller’s Market

More info on earnest money:


Are you ready to apply? Start the process by completing the form below.

  • Are you looking to buy or refinance a home?
  • What is your price range?
  • Do you currently own a home?
  • What type of property are you buying?
  • When are you planning to make your home purchase?
  • Have you (or your spouse) ever served in the US military?
  • Have you declared bankruptcy in the past 7 years?
  • Is this your first time purchasing a home?
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