Earnest money could seal the deal when buying your dream home. When a homebuyer finds his or her dream house and it’s time to get serious, putting down earnest money is a great step toward closing – but what is earnest money?

Earnest money is how homebuyers show the seller they are truly interested in a home by laying down a cold hard cash deposit. Earnest money represents a homebuyer’s commitment to buying the house and indicates that he or she is operating in good faith.

Since putting down earnest money is a good faith gesture, the bigger the homebuyer’s deposit – the happier the seller will be. A larger deposit will reassure a seller that the homebuyer is serious about wanting the home. It also ties the homebuyer to the property and will make him or her think twice about looking at other new homes.

The amount of a homebuyer’s earnest money can range from $1,000 to 10 percent of the sales price of the house in cash. It can be forfeited if the homebuyer breaks the contract and walks away from the deal, so homebuyers should make sure they are certain before spending part of their home savings on a place that is not ideal for them.

Earnest money is put down at the same time a homebuyer makes an offer on a new home. After the home has undergone a thorough inspection and the sale is complete, the earnest money is used as part of the homebuyer’s cash down payment.

Gaining a seller’s trust with earnest money can make the homebuying process a much smoother experience for everyone, and it can give homebuyers some leverage when it comes to closing on their dream house.