Breaking Down Earnest Money, Down Payment & Closing Costs
1. Earnest Money Deposit (EMD)What it is:
An earnest money deposit is a good-faith payment made when you submit your offer on a home. It shows the seller you're serious and committed to the purchase.
How much:
Typically 1% to 3% of the purchase price, but it can vary depending on your market and negotiation.
Where it goes:
This money is held in escrow and later applied toward your down payment or closing costs at settlement.
Is it refundable?
In many cases, yes—if you back out due to a valid contingency (like a failed inspection or financing issue). Otherwise, it may be forfeited to the seller.
2. Down PaymentWhat it is:
The portion of the home's purchase price that you pay upfront—before financing kicks in. The remaining balance is covered by your mortgage.
How much:
Down payments vary depending on your loan type:
- Conventional Loans: As low as 3%–5%
- FHA Loans: Minimum of 3.5%
- VA & USDA Loans: Often $0 down, if eligible
- Jumbo Loans: Usually 10%–20%+
Where it goes:
It reduces the amount you borrow and may impact whether you need private mortgage insurance (PMI).
Helpful tip:
A larger down payment can reduce your monthly payment and interest paid over time—but we’ll help you decide what’s best based on your financial goals.
3. Closing CostsWhat they are:
These are the fees and expenses (outside of the down payment) required to finalize your home loan and transfer ownership.
What’s included:
- Lender fees (origination, underwriting)
- Title search and insurance
- Appraisal and credit report
- Recording fees and taxes
- Prepaid items (property taxes, homeowners insurance, interest)
How much:
Typically 2% to 5% of the home’s purchase price.
Can they be negotiated?
Yes—sometimes sellers may agree to contribute toward closing costs, especially in a buyer-friendly market.
Summary ExampleFor a $300,000 home:
- Earnest Money: ~$3,000–$9,000
- Down Payment (5%): $15,000
- Closing Costs (3%): ~$9,000
Total Upfront Costs: Around $27,000–$33,000 (depending on loan type and negotiated terms)
We’re Here to Help
Every buyer’s situation is different, and our team at Heartland Financial & Mortgage will walk you through your options—step by step. We’ll explain how much you’ll need, when you’ll need it, and how to make the numbers work for your budget.
An earnest money deposit is a good-faith payment made when you submit your offer on a home. It shows the seller you're serious and committed to the purchase.
How much:
Typically 1% to 3% of the purchase price, but it can vary depending on your market and negotiation.
Where it goes:
This money is held in escrow and later applied toward your down payment or closing costs at settlement.
Is it refundable?
In many cases, yes—if you back out due to a valid contingency (like a failed inspection or financing issue). Otherwise, it may be forfeited to the seller.
2. Down PaymentWhat it is:
The portion of the home's purchase price that you pay upfront—before financing kicks in. The remaining balance is covered by your mortgage.
How much:
Down payments vary depending on your loan type:
- Conventional Loans: As low as 3%–5%
- FHA Loans: Minimum of 3.5%
- VA & USDA Loans: Often $0 down, if eligible
- Jumbo Loans: Usually 10%–20%+
Where it goes:
It reduces the amount you borrow and may impact whether you need private mortgage insurance (PMI).
Helpful tip:
A larger down payment can reduce your monthly payment and interest paid over time—but we’ll help you decide what’s best based on your financial goals.
3. Closing CostsWhat they are:
These are the fees and expenses (outside of the down payment) required to finalize your home loan and transfer ownership.
What’s included:
- Lender fees (origination, underwriting)
- Title search and insurance
- Appraisal and credit report
- Recording fees and taxes
- Prepaid items (property taxes, homeowners insurance, interest)
How much:
Typically 2% to 5% of the home’s purchase price.
Can they be negotiated?
Yes—sometimes sellers may agree to contribute toward closing costs, especially in a buyer-friendly market.
Summary ExampleFor a $300,000 home:
- Earnest Money: ~$3,000–$9,000
- Down Payment (5%): $15,000
- Closing Costs (3%): ~$9,000
Total Upfront Costs: Around $27,000–$33,000 (depending on loan type and negotiated terms)
We’re Here to Help
Every buyer’s situation is different, and our team at Heartland Financial & Mortgage will walk you through your options—step by step. We’ll explain how much you’ll need, when you’ll need it, and how to make the numbers work for your budget.
