# Earnest Money Calculator

## About Earnest Money Calculator (Formula)

The Earnest Money Calculator is a valuable tool used in real estate transactions to determine the initial deposit made by a buyer as a show of good faith to secure a property. Earnest money, also known as a good faith deposit, is typically held in escrow and applied towards the down payment or closing costs. The formula to calculate earnest money is:

Earnest Money = Purchase Price × Earnest Money Percentage

Where:

• “Purchase Price” represents the agreed-upon price of the property.
• “Earnest Money Percentage” is the percentage of the purchase price that the buyer is required to provide as earnest money.

For example, if a property has a purchase price of \$300,000 and the buyer is required to provide 3% earnest money, the earnest money can be calculated as follows:

Earnest Money = \$300,000 × 0.03 = \$9,000

This indicates an earnest money deposit of \$9,000.

The Earnest Money Calculator is utilized by homebuyers, real estate agents, and sellers to establish the initial financial commitment in a real estate transaction. It demonstrates the buyer’s sincerity and seriousness about purchasing the property. The earnest money deposit is held in escrow until the closing of the transaction, at which point it’s typically applied towards the down payment or closing costs.