Are you clear on how earnest money and a down payment work when you buy a home in Clark County or across the river in Portland? Many buyers mix them up, which can lead to costly mistakes. You want to write a strong offer without putting more at risk than you intend. In this guide, you’ll learn what each term means, typical local amounts, when funds are due, refund rules, and smart strategies to use in our Portland–Vancouver market. Let’s dive in.
Earnest money vs down payment
Earnest money is a good‑faith deposit you deliver after your offer is accepted. A neutral third party, usually the escrow or title company, holds it according to the purchase agreement. If the sale closes, it is credited toward your closing costs and down payment.
Down payment is the portion of the purchase price you bring in cash at closing. It is the difference between your loan amount and the purchase price, and it affects your loan options, mortgage insurance, and monthly payment.
How they relate: Earnest money is paid early and held in escrow, then applied to your down payment and closing costs at closing. The down payment itself is paid at closing.
Typical amounts in our area
- Earnest money: Many offers in the Portland–Vancouver region use about 1 to 3 percent of the purchase price. In multiple‑offer situations, buyers sometimes offer 3 to 5 percent or a larger flat amount to stand out. In slower segments, smaller or symbolic deposits, such as $500 to $5,000, can still be common on lower‑priced homes.
- Down payment by loan type: Conventional loans can start around 3 percent down, with many buyers choosing 5 to 20 percent. FHA commonly requires 3.5 percent down for qualifying borrowers. VA and USDA may allow 0 percent down for eligible buyers. Jumbo or investment loans often require higher down payments.
Your loan program, price point, and comfort with risk will guide both amounts.
When you pay and who holds the funds
- Earnest money due date: Your signed purchase agreement sets the deadline. In our region, buyers often deposit within 1 to 3 business days after mutual acceptance, but always follow the timing written in your contract.
- Who holds it: A title or escrow company usually holds earnest money in a trust account. In some cases the listing brokerage’s trust account will hold funds until a title or escrow company is designated.
- Closing timeline: Most transactions close within about 30 to 45 days, depending on lending and appraisal timelines. At closing, your escrow officer applies your earnest money to your cash‑to‑close on the final statement.
When earnest money is refundable
Earnest money is typically refundable when you follow the contract precisely:
- You cancel within a clear contingency window, such as inspection, financing, or appraisal, and you follow the notice steps and deadlines.
- The seller cannot meet a contract requirement, such as curing a title defect.
- Both parties sign a mutual written release.
Whether your earnest money is refundable depends on the exact language in your signed agreement, so do not assume a refund unless a contingency allows it and you act on time.
When you could forfeit earnest money
You can lose earnest money if you breach the contract or cancel without a contractual exit. Common examples include removing contingencies, then backing out for a reason not covered, or missing a key deadline that causes default. Some agreements allow the seller to keep earnest money as liquidated damages. The safest path is to track every deadline and follow the procedures in the contract.
Common scenarios in Clark County and Portland
- Low appraisal: Your appraisal or financing contingency controls your options. If the appraisal comes in low and the contract gives you the right to terminate or renegotiate, you can often cancel within the deadline and keep your earnest money. Without that protection, you may need to bring extra cash or risk forfeiture.
- Inspection findings: During the inspection period, you can request repairs or credits, or you can cancel. If you cancel properly within the inspection window, earnest money usually returns to you.
- Disagreement over release: If one party refuses to release the funds, escrow will hold them until it receives clear instructions. The dispute process in the forms can include mediation, arbitration, or court.
How much earnest money should you offer?
Match your deposit to market conditions and your risk tolerance.
- Slower or balanced market: A smaller flat amount, such as $1,000 to $5,000, or about 1 percent, can be acceptable on many homes.
- Typical conditions: About 1 to 3 percent often signals seriousness without overexposing you to loss.
- Multiple‑offer situations: Consider 3 percent or more, or a larger flat figure that fits your budget. You can also pair a stronger deposit with clear contingency timelines. Only increase risk if you are fully comfortable with the consequences.
Tip: A strong offer is more than a big deposit. Clean contract terms, a complete pre‑approval, and on‑time delivery of documents often matter just as much.
Coordinating with your lender and escrow
- Documenting funds: Your lender will verify where your down payment and earnest money came from. Keep clear records and avoid moving funds between accounts without a paper trail.
- Applying earnest money: Your Closing Disclosure and final settlement statement will show your earnest money credit. It counts toward your down payment and closing costs.
- Timing matters: Deposit your earnest money by the contract deadline and keep the receipt. Late deposits can create default risk or weaken your negotiating position.
Washington vs Oregon, what changes across the river?
The purpose of earnest money is the same in both states. The differences are in contract forms and some closing procedures. Washington buyers in Clark County typically use Washington REALTORS forms, while Oregon buyers use Oregon Association of REALTORS forms. Each set of forms has its own contingency language, deposit timing, and dispute steps. Always follow the wording in your executed state‑specific contract.
Key takeaways
- Earnest money is a good‑faith deposit held by escrow, paid soon after acceptance, and applied to your costs at closing.
- Down payment is the cash you bring at closing to complete your purchase.
- Typical earnest money in our area is about 1 to 3 percent. The exact amount and timing come from your signed offer.
- Refundability depends on contingencies and strict compliance with deadlines. If in doubt, ask before you act.
Ready to fine‑tune your earnest money and down payment strategy for a Clark County or Portland purchase? Reach out to the Daniel Belza Team for clear guidance tailored to your goals.
FAQs
Will my earnest money count toward my down payment?
- Yes. If your sale closes, the escrow officer applies your earnest money to your down payment and closing costs on the final statement.
How much earnest money should a first‑time buyer use in Clark County?
- Many first‑time buyers choose $500 to $5,000 on lower‑priced homes or about 1 to 3 percent in typical situations, balancing offer strength with acceptable risk.
Is earnest money automatically refundable if I change my mind?
- No. It is refundable only if you cancel under a contract contingency within its deadline or both parties sign a mutual release.
What happens if the appraisal is low in Washington or Oregon?
- Your appraisal or financing contingency controls your options. If you follow the notice steps and timelines in the contract, you can usually cancel and keep your earnest money.
How quickly is earnest money due after mutual acceptance in Clark County?
- Your contract sets the deadline. Many local offers call for deposit within 1 to 3 business days, so confirm the exact timing in your signed agreement.
Who holds earnest money in the Portland–Vancouver area?
- A neutral escrow or title company usually holds it in a trust account. Sometimes the listing broker’s trust account holds funds until an escrow company is named.
