Buying a home in Seattle comes with new terms and fast decisions. Two that cause the most confusion are earnest money and your down payment. If you are getting ready to make an offer, you want to know how each one works, how much to plan for, and when your money is at risk. In this guide, you will learn the key differences, local timelines, typical amounts, and smart ways to protect your deposit while staying competitive. Let’s dive in.
Earnest money basics
Earnest money is a good‑faith deposit you provide shortly after the seller accepts your offer. It shows you are serious about buying. The amount and delivery deadline are written into the purchase agreement. In Washington, the standard residential forms used in Seattle specify when and where the deposit is delivered and held.
The escrow or title company usually holds your earnest money in a trust account. Sometimes it is held by a broker in a trust account, depending on the contract. If you close, the deposit is credited toward your cash to close. It is not an extra fee unless it is forfeited under the contract.
Down payment basics
Your down payment is your equity contribution at closing. It reduces how much you borrow from the lender. The size of your down payment can influence your interest rate, whether you need private mortgage insurance, and your monthly payment.
You provide your down payment at closing, either by wire or cashier’s check per the title company’s instructions. Lenders will require documentation that shows where the funds came from. If you plan to use gift funds, your lender will guide you on the rules and paperwork.
The core difference
- Earnest money is paid shortly after you reach mutual acceptance and is held in escrow as a sign of commitment.
- Down payment is paid at closing and represents your ownership stake in the home.
- If you close, your earnest money is applied to your total cash to close. It helps fund your down payment and closing costs.
When you pay each in Seattle
- Earnest money timing: Typically due immediately or within a few business days after mutual acceptance, as stated in the purchase agreement. Many local contracts use a 1 to 3 business day window.
- Down payment timing: Provided at closing (often wired the day before or on the morning of closing) as part of your cash to close.
How much to plan for
Earnest money ranges
In the Seattle area, earnest money is market‑sensitive. A common range used by local practitioners is about 1 to 3 percent of the purchase price, or a flat amount that often falls between 5,000 and 25,000 dollars on many urban single‑family and condo purchases. In multiple‑offer situations or on higher‑priced homes, buyers sometimes increase the deposit to strengthen the offer. These are norms, not rules, and your strategy should reflect the current level of competition.
Down payment options
Your down payment depends on your loan type and goals:
- Conventional financing can start as low as 3 percent for qualified buyers, though many target 20 percent to avoid private mortgage insurance.
- FHA financing typically requires 3.5 percent down for eligible borrowers.
- VA loans may offer zero percent down for eligible veterans and service members.
In Seattle, where prices are higher, even a smaller percentage can be a large dollar amount. Your lender can help you evaluate how different down payment levels affect your monthly payment and total cash to close.
What happens to earnest money at closing
If you close, your earnest money becomes a credit on your settlement statement. It is applied toward your down payment and closing costs. It is not additional money above what you already planned to bring.
Example: You buy a home for 700,000 dollars with a 10 percent down payment (70,000 dollars). You posted 14,000 dollars in earnest money. At closing, that 14,000 dollars is credited to your down payment, so you bring the remaining 56,000 dollars plus closing costs, and your lender funds the rest.
Refundability and contingencies
Earnest money is refundable when you cancel under a valid contract contingency within the allowed timeline. It may be forfeited if you default after protections expire or are waived. The details are controlled by your signed purchase agreement and Washington law. Common contingencies include:
Inspection
This gives you time to inspect the home and negotiate or cancel. If you terminate in writing within the inspection period, your earnest money is typically refundable. If you waive the inspection or miss the deadline, your deposit can be at risk if you later try to cancel for inspection issues.
Financing
If you cannot secure financing by the agreed date and properly terminate under the financing contingency, your deposit is typically refundable. If you waive the financing contingency or miss required steps, your deposit is at risk if you cannot close.
Appraisal
If the home appraises below the purchase price and you have an appraisal contingency, you may renegotiate, bring extra cash, or terminate per the contract. A timely termination under this contingency usually preserves a refund.
Title and HOA documents
If title problems or unacceptable HOA documents are discovered and you cancel within the contract timelines, your earnest money is typically refundable.
Sale of buyer’s current home
If your offer includes a home sale contingency and you terminate under that contingency, your deposit is usually refundable.
When earnest money becomes nonrefundable
As you remove contingencies, your protections fall away. Once your inspection, financing, appraisal, and document review periods are waived or expired, you have fewer reasons to cancel without losing your deposit. Some buyers offer a nonrefundable deposit from the start to compete. That can be risky and should be considered with care.
Disputes and release of funds
Escrow will release the earnest money only with written instructions signed by both parties or a court or arbitrator order. Standard forms include steps for dispute resolution. If there is a disagreement, funds may remain in escrow until the parties resolve the issue through negotiation, mediation, arbitration, or litigation. Keep good records and deliver notices in writing and on time.
Making a competitive offer without unnecessary risk
- Use a meaningful earnest money amount that signals commitment, but set it at a level you are comfortable risking if you later waive contingencies.
- Shorten contingency timelines only if you can fully perform within them. Speed is helpful only when your team can actually meet the deadlines.
- Avoid waiving critical protections unless you have strong certainty on condition, financing, and appraisal.
Coordinating your cash flow
- Keep your earnest money liquid so you can deposit it within the 1 to 3 business day window common in Seattle contracts.
- Ask your lender exactly what documentation is needed for your earnest money and down payment. Save bank statements, transfer receipts, and any gift letters.
- Confirm acceptable deposit methods with the escrow or title company. Verify wiring instructions by calling the number on the company’s official website. Wire fraud is real. Never rely solely on emailed instructions.
Buyer checklist
- Define the difference: earnest money is the early good‑faith deposit held in escrow; the down payment is your equity paid at closing.
- Know the holder and deadline: your contract names who holds the deposit and when it is due.
- Track contingencies: inspection, financing, appraisal, title, HOA, and any sale contingency have strict timelines that control refund rights.
- Keep records: keep receipts, inspection reports, and written notices of termination or contingency removal.
- Model the math: know how your earnest money will credit toward your cash to close.
- Plan the source of funds: coordinate gifts, transfers, and documentation early with your lender.
Seattle‑specific insights
- In a competitive week, some sellers weigh larger earnest money deposits more heavily. But sellers also watch for clean financing and fewer moving parts. A large deposit does not replace strong loan approval.
- Earnest money strategy should match property type and price point. For example, a higher earnest money percentage is more common on premium, well‑prepared listings that attract multiple offers.
- If you are relocating, align your travel, inspection availability, and lender milestones with your contingency timelines so you do not miss a deadline.
How Mr Magnolia supports you
You get clear timelines, a tailored offer strategy, and tight coordination with your lender and the escrow team. We help you set an earnest money amount that strengthens your offer without taking on unnecessary risk. We track every deadline, prepare notices, and keep your documentation organized so your deposit is protected through closing.
Ready to plan your path to keys in hand? Reach out to the neighborhood team that lives and works here. Connect with Mr Magnolia for local guidance and a clear next step.
FAQs
What is the difference between earnest money and a down payment?
- Earnest money is a good‑faith deposit paid soon after mutual acceptance and held in escrow, while a down payment is your equity paid at closing. If you close, the earnest money is credited toward your cash to close.
How much earnest money is typical in Seattle?
- Many offers use about 1 to 3 percent of the price or a flat 5,000 to 25,000 dollars, with higher deposits in competitive situations. Your exact amount should fit market conditions and your risk tolerance.
When do I get my earnest money back if I cancel?
- If you cancel within a valid contract contingency period, such as inspection, financing, appraisal, or document review, you typically receive a refund. Missing deadlines or waiving protections can put the deposit at risk.
Who holds my earnest money in Washington?
- The escrow or title company named in your contract usually holds the funds in a trust account. In some cases, a broker’s trust account holds the deposit, as directed in the agreement.
Does earnest money count toward my down payment at closing?
- Yes. If you close, it appears as a credit on your settlement statement and applies toward your down payment and closing costs.
What happens if there is a dispute over the earnest money?
- Escrow will release the funds only with written instructions from both parties or a court or arbitrator order. The standard contract includes steps for dispute resolution.
Can I use gift funds for my down payment?
- Many loan programs allow gift funds if you follow lender documentation rules. Your lender will outline proof and timing requirements so the funds can be used at closing.