What Is Earnest Money in Texas?
The short answer
Earnest money is a good-faith deposit you make when a seller accepts your offer. In Texas it is usually held by the title company named in the contract, and at closing it goes toward your down payment and closing costs. You can generally get it back if you cancel within the protections your contract gives you, but you could lose it if you back out without one.
How it works in a Texas purchase
- You and the seller agree on the amount in the contract. It varies with price and how competitive the home is. Your agent can tell you what is typical for the area.
- You deliver it to the title company by the deadline in the contract.
- It sits in escrow until closing or until the contract ends.
- At closing, it is credited to you, lowering the cash you bring to the table.
When you can usually get it back
- You end the contract during your option period (more on that in our next post)
- Financing falls through and your contract includes a financing addendum, and you give notice on time
- Another contract condition is not met and you follow the steps in the contract
When you could lose it
- You simply change your mind after your protections expire
- You miss a contract deadline
Deadlines in Texas contracts are strict. Put every date in your phone the day you sign.
Earnest money vs. option fee
They are two different checks. The option fee buys you the right to back out for any reason during the option period. Earnest money shows you are serious about closing.
Frequently asked questions
Can I use gift money for earnest money?
Often yes, with proper documentation. Tell your lender before you write the check.
Does a bigger deposit make my offer stronger?
It can signal confidence, but only commit what you are comfortable having at risk.
Next step: read pre-approval vs. pre-qualification, call (469) 414-5554, or visit our Texas branch. This is general information, not legal advice; your agent or a real estate attorney can explain your specific contract.
By Kelly Welton, Mortgage Broker (NMLS #314183), Mohave Mortgage Texas Branch. Mohave Mortgage NMLS #1830581 · Texas Branch NMLS #2690682 · Equal Housing Opportunity. General information only, not a commitment to lend or financial advice. Programs, rates and guidelines vary and change.
