Are you hearing “earnest money” and “down payment” and wondering which one you actually need to save for? You are not alone. These two terms sound similar, but they do different jobs in a Florida home purchase. When you understand each one, you can make stronger offers, stay protected, and budget with confidence.
In this guide, you will learn what each term means, how they work together at closing, typical amounts in Cocoa Beach and Brevard County, Florida contract timelines, refund rules, and smart ways to stay competitive without taking on too much risk. Let’s dive in.
What earnest money is
Earnest money is a good‑faith deposit you put down when you go under contract. It shows the seller you are serious. A title company, closing agent, or a broker’s escrow account holds this money in escrow. You do not pay it to the seller directly.
Your earnest money is credited to you at closing. It usually applies to your down payment and/or closing costs. If you follow the contract and close, the funds are not extra. They become part of what you already owe.
The purpose is simple: it gives the seller confidence and provides some protection if a buyer breaches the contract.
What a down payment is
Your down payment is the part of the purchase price you pay at closing. It is the difference between the price and your loan amount. Your loan type and personal choice set the amount:
- FHA: minimum 3.5% if you qualify
- Conventional: as low as 3% for certain programs, often 5%, and 20% to avoid PMI
- VA: 0% for eligible borrowers (a VA funding fee may apply unless exempt)
- USDA: 0% in eligible rural areas (with eligibility)
- Cash purchase: 100% down
You typically do not pay the down payment until closing. Your earnest money deposit counts toward it.
How they work together at closing
At closing, your earnest money is deducted from the total cash you owe. Think of it like a credit.
- Required down payment = Purchase price minus loan amount.
- Earnest money = A credit toward that total cash due.
Example: If the price is $450,000 and your FHA down payment is 3.5% ($15,750), and you already deposited $6,750 in earnest money, you would bring the remaining $9,000 for the down payment at closing, plus any closing costs due.
Typical Cocoa Beach amounts
In Cocoa Beach and across the Space Coast, local practice often looks like this:
- Earnest money: commonly 1% to 3% of the price. For many single‑family homes, $2,000 to $10,000 is typical. For lower‑priced condos, $1,000 to $2,500 is common. In tight, multiple‑offer situations, you may see 2% or higher to strengthen an offer.
- Down payment: varies by loan program. FHA at 3.5%, conventional often 3% to 20%, VA and USDA can be 0% for eligible buyers.
These are ranges, not rules. The right amount for you depends on your financing, the property, and how competitive the situation is.
Florida escrow and key deadlines
Florida contracts spell out where the earnest money goes and when it is due. Here is what to track:
- Escrow holder: The contract should name the escrow agent (title company, closing agent, or broker) and give delivery instructions. Get a written receipt that shows the deposit date.
- Delivery timing: Brokers must place escrow funds promptly, commonly within 3 business days of receipt. Title companies follow their own procedures once they receive funds. Your contract may also set a delivery window after the effective date.
- Inspection period: Negotiated, commonly 7 to 15 days. Complete inspections and deliver any repair requests or cancellation within this window for protections to apply.
- Financing contingency: Often 14 to 21 days, depending on your loan. Your lender must provide the right documentation if financing falls through.
- Closing date: Typically 30 to 45 days from the effective date, but this is negotiable.
If a deadline is missed, you can lose certain rights. Track every date in writing.
When earnest money is refundable
Your earnest money is often refundable if you cancel for a valid, timely reason allowed by the contract. Common examples include:
- You cancel within the inspection period under the inspection contingency.
- You are denied financing and follow the contract’s notice rules within the financing contingency period.
- A title defect cannot be cured within the contract timeframe and you cancel as permitted.
- The seller cannot perform, such as failing to convey marketable title, and you cancel under the contract.
Each contract spells out the exact steps and timing. Use written notices and keep documentation.
When earnest money is at risk
Your deposit is at risk if you default or miss deadlines. Situations that can put your earnest money in jeopardy include:
- You do not cancel within the inspection period and later try to back out without another valid contingency.
- You waive contingencies, then decide not to close.
- You fail to close without an applicable contingency or breach another material term.
- You agree to a non‑refundable deposit clause.
If there is a dispute, escrow agents often hold the funds until both parties agree in writing or a court or arbitration decides.
How to stay competitive and protected
A larger deposit can make your offer stronger, but you do not need to take on unnecessary risk. Consider these approaches:
- Increase earnest money modestly rather than waiving important contingencies.
- Keep the financing contingency, but shorten timelines if your lender is ready and you hold a strong pre‑approval.
- Use an appraisal gap clause only with clear dollar limits you can afford.
- Avoid non‑refundable language unless you fully understand the risk and are comfortable with it.
- Work with your agent and lender to align offer terms with your budget and timeline.
Safe‑handling checklist
Use this quick checklist to protect your deposit and your deal.
Pre‑offer:
- Get a full lender pre‑approval.
- Ask about typical earnest money amounts in your target neighborhood and price point.
At contract execution:
- Name the escrow agent in the contract and follow the deposit instructions.
- Deliver your deposit quickly and obtain a dated receipt.
- Confirm the deposit timeline so you do not miss it.
During the transaction:
- Track inspection, financing, appraisal, and title deadlines in writing.
- Use written notices to request repairs or cancel within contingency windows.
- Keep inspection reports, lender letters, and all correspondence.
If a dispute arises:
- Review the contract’s escrow and dispute paragraph.
- Involve your agent’s broker or local real estate counsel as needed.
Cocoa Beach example walk‑through
Let’s say you are buying a $450,000 Cocoa Beach home.
- You offer $6,750 in earnest money (about 1.5%).
- You use FHA financing at 3.5%, so your down payment is $15,750.
- At closing, that $6,750 counts toward what you owe. You would bring $9,000 to complete the down payment, plus any closing costs owed under your loan terms.
This is only an example. Your numbers depend on the program you use, your rate and fees, and the contract you negotiate.
Final thoughts
If you remember one thing, make it this: earnest money is a good‑faith deposit you pay early, and it is credited back to you at closing. The down payment is the larger amount you pay at closing, set by your loan and your choices. In Cocoa Beach, the right approach balances a strong offer with clear protections and tight tracking of deadlines.
Ready to talk strategy for your budget and timeline on the Space Coast? Reach out to Millie Gwin to map out your next steps and write a confident, competitive offer.
FAQs
What is the difference between earnest money and down payment in Florida?
- Earnest money is a good‑faith deposit held in escrow after you go under contract and is credited to you at closing, while the down payment is the portion of the price you pay at closing.
How much earnest money is typical in Cocoa Beach?
- Many local offers include about 1% to 3% of the price, often $2,000 to $10,000 for single‑family homes and $1,000 to $2,500 for lower‑priced condos, with higher amounts in competitive cases.
When is earnest money due under Florida contracts?
- The contract sets the deadline, commonly within a short window after the effective date; brokers must deposit funds promptly, often interpreted as within 3 business days of receipt.
Can I get my earnest money back if financing falls through in Florida?
- Often yes if your financing contingency is in place and you deliver proper, timely notice (such as a lender denial) within the agreed timeframe as the contract requires.
Who holds the earnest money in Cocoa Beach transactions?
- A named escrow agent holds it, typically a title company, closing agent, or broker escrow account, as specified in the purchase contract.
Is earnest money applied to my down payment or closing costs?
- It is credited to you at closing and can apply to your down payment and/or closing costs, reducing the total cash you need to bring.
