Earnest Money Deposit Rules
Putting a deposit down on a home? Your earnest money can count toward your down payment and closing costs. Depending on the loan, the lender may need to see where it came from and that it changed hands.
Quick answer
Yes. Under Fannie Mae’s rules, the earnest money deposit is an acceptable source of funds for both the down payment and the closing costs. Receipt is shown with a copy of your canceled check or a written statement from whoever holds the deposit. Large deposits, or deposits above what is customary for the area, are closely evaluated.
What lenders check on your deposit
Each item below is a Fannie Mae or FHA rule, or a requirement of at least one program we offer.
- Proof the deposit changed hands: a copy of your canceled check or a written statement from whoever holds the deposit.
- Bank statements or a verification of deposit showing your average balance for the past two months could cover the deposit.
- Statements that run up to and include the date the deposit check cleared, when the canceled check is used to show the source.
- Extra proof of the source if it is not clear the money came out of your account.
- A closer review of deposits that are large or above what is customary for the area.
- A deposit that is not paid in cryptocurrency. Fannie Mae does not allow virtual currency for the deposit on the sales contract.
Counts toward your costs
Proof it changed hands
Two months of statements
Large deposits get a closer look
Gift money has rules
Sometimes no paperwork at all
Does Earnest Money Count Toward Your Down Payment?
Yes. Fannie Mae counts the deposit on the sales contract as an acceptable source of funds for both the down payment and the closing costs.
Yes. Under Fannie Mae’s rules, the deposit on the sales contract is an acceptable source of funds for both the down payment and the closing costs. It is treated as a credit to the transaction, so it lowers the funds you need at closing. Because the check is assumed to have cleared your account, it is not counted again in your bank balance.
When the deposit is part of your required contribution, the lender looks at two things. First, that the money came from an acceptable source: bank statements or a verification of deposit showing your average balance for the past two months was large enough to cover it. Second, that it actually changed hands: a copy of your canceled check or a written statement from the holder of the deposit. Large deposits, or deposits above what is customary for the area, get a closer review.
FHA has its own version. The lender documents the deposit and its source when it is more than 1 percent of the sales price or looks high against your history of saving, using your canceled check, a statement from the deposit holder, a bank statement or verification of deposit, or an electronic verification. If the deposit came from a gift, the gift has to meet FHA’s gift rules. See our gift funds page.
Why choose Saxton when your deposit is on the line
This page is for buyers who have made, or are about to make, an earnest money deposit on a home.
It Counts Toward Closing
Fannie Mae treats the deposit as a credit that lowers the funds you need at closing.
Two Months Of Statements
Your average balance for the past two months should cover the deposit.
Check Or Written Receipt
A canceled check or a statement from the deposit holder proves it changed hands.
Gifts Follow Gift Rules
On FHA, a gift can fund the deposit if it meets FHA’s gift rules.
No Cryptocurrency Deposits
Fannie Mae does not allow virtual currency for the deposit on the sales contract.
Paperwork Can Be Skipped
At least one program skips deposit paperwork when your other verified funds still cover closing and reserves.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers about earnest money and your loan.
Yes. Under Fannie Mae’s rules, the earnest money deposit is an acceptable source of funds for both the down payment and the closing costs. Receipt is shown with a copy of your canceled check or a written statement from whoever holds the deposit. Large deposits, or deposits above what is customary for the area, are closely evaluated.
Usually two things: bank statements or a verification of deposit showing your average balance for the past two months could cover the deposit, and either your canceled check or a written statement from the holder of the deposit.
When your canceled check is used to show where the money came from, Fannie Mae requires bank statements that cover the period up to and including the date the check cleared your account.
Sometimes. At least one program does not require earnest money documentation when your other verified funds, with the deposit taken out, still cover your funds to close and any required reserves.
FHA requires the lender to document the deposit and its source when it is more than 1 percent of the sales price, or when it looks high compared with your history of saving.
On FHA, yes, as long as the gift meets FHA’s gift rules, and the lender verifies that before closing. Other loan types have their own gift rules, so ask us before you use gift money for the deposit.
Not under Fannie Mae’s rules. Virtual currency cannot be used for the deposit on the sales contract, although crypto that was exchanged into U.S. dollars can be used for other funds when it is documented.
Find out what you qualify for
Tell us what you put down and where it came from, and we will tell you exactly what paperwork your lender will ask for.
Get Pre-QualifiedLoan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.