Earnest money is part of the purchase funds you have already delivered under the contract. It isn't automatically an extra charge on top of the down payment. At closing, the deposit should be credited appropriately toward the transaction.
The mortgage review has two questions: did the deposit reach the authorized holder, and did it come from an acceptable source? Proof of one doesn't always establish the other.
Keep the deposit inside the total budget
Hypothetical example: a $400,000 purchase uses a $360,000 base mortgage. The buyer needs a $40,000 down payment and $12,000 in closing expenses, with no credits or other adjustments. Total buyer funds are $52,000.
If the buyer already paid $10,000 in earnest money, the remaining amount is $42,000. It isn't $52,000 plus the deposit. It also isn't a $30,000 down payment merely because $10,000 of the contribution was sent early.
The deposit changes when the money is paid. It doesn't create a second purchase price. Cash to close expands the full reconciliation.
Verify where the deposit went
Keep the canceled check, bank transfer record and written receipt from the deposit holder as applicable. The contract and settlement records should identify the proper holder.
Fannie Mae's earnest money provision requires verification of receipt through the specified evidence, such as a canceled check or the holder's written statement. The lender also needs source verification when the deposit supports the buyer's minimum contribution.
A screenshot saying payment sent may not establish that the closing agent received and credited it. If the transfer is still pending or the recipient can't find it, resolve that immediately with the actual bank and holder.
A receipt doesn't identify the original source
Suppose the escrow agent confirms receipt of $15,000. Your account shows a $15,000 incoming transfer the day before the deposit left. The holder's receipt confirms delivery. It doesn't explain the incoming transfer.
If that money came from another verified account, provide the connection. If it came from a gift, follow gift requirements. If it came from a loan, disclose the actual debt and source so the lender can determine eligibility.
Don't assume that money becomes acceptable simply because it has already been accepted under the sales contract. The mortgage source rules still apply.
Use the correct contribution category
A family member may be willing to send the deposit directly. Tell the lender before that happens. If the program permits a documented gift, it should be treated as a gift. It shouldn't be reported as the buyer's own saved funds merely because the deposit is in the buyer's name on the contract.
Some transactions have a minimum contribution from your own funds. A permitted gift may supplement that requirement without satisfying it. Gift funds explains the distinction.
The same issue can arise when a business account pays the deposit. Account access and the business source analysis should be resolved before relying on the money.
A large deposit needs a complete trail
A substantial earnest money amount can be entirely legitimate, but the lender may review it closely under the applicable rule and file. Fannie's guide addresses large or unusual deposits and bank records supporting the amount.
Provide the requested account period, including when a check cleared if that method is used. A statement ending before the withdrawal may not show the required movement.
If the source can't be established from the initial records, ask what additional evidence would resolve it. Large deposit underwriting owns the broader diagnosis; this page follows the specific contract deposit through the transaction.
Don't count money that has already left
Hypothetical reserve example: before the deposit, the buyer's account holds $65,000. Paying $10,000 earnest money leaves $55,000. The remaining closing requirement is $42,000. After closing, $13,000 remains, before other withdrawals.
If a lender uses the old $65,000 balance without deducting the deposit and remaining closing cash, it overstates reserves. If it starts with the updated $55,000 balance and deducts the $10,000 deposit again, it understates them.
Identify the statement date and every transaction included. The same money should appear once as an asset and once as a use, at the correct point in time.
A financing denial doesn't settle refund rights
Whether earnest money is refundable depends on the contract, contingencies, notices, deadlines and applicable law. Mortgage denial alone doesn't answer every deposit dispute.
Notify the real estate agent or attorney promptly if financing is at risk. Ask the lender for the documented reason needed for the contractual process, but don't rely on a loan officer to interpret legal refund rights.
The financing task is to provide accurate loan status and required evidence. The contract professionals handle whether and how a contingency must be exercised.
Protect the original transfer too
Verify the deposit holder and payment instructions independently before sending funds. Earnest money is exposed to the same redirection risk as the final closing wire.
Before closing, confirm the credited amount, verified source, current account balances and remaining cash. A clean deposit record makes underwriting easier and prevents a payment made weeks earlier from becoming a last day accounting problem.
Common questions
How much earnest money is normal?
It varies by market and price, often 1% to 3% of the price.
Do I have to show where the earnest money came from?
Yes, with bank statements and proof the deposit cleared.
Can I get my earnest money back if my loan is denied?
It depends on your contract and its financing contingency.