When you buy a house, you pay the down payment in two stages: a smaller earnest money deposit within one to three business days of your offer being accepted, and the remaining balance on closing day, usually 30 to 60 days later. Most buyers plan carefully for the closing day transfer and are caught off guard by how fast the first payment comes due.
How much you owe overall depends on your loan. Conventional loans can go as low as 3% down, FHA loans require 3.5% with a credit score of 580 or higher, and VA and USDA loans allow qualified buyers to put down nothing at all. The timing of the two payments, though, works the same way regardless of program.
The Earnest Money Deposit
The clock starts the moment the seller signs your offer. Most purchase contracts require the earnest money deposit within one to three business days. The payment signals that you’re serious, and it gets credited back toward your total down payment at closing. The funds go to an escrow or title company rather than to the seller directly, and they sit in a protected account until the deal either closes or falls apart.
How much you put down as earnest money varies by market. Where buyers have leverage, 1% to 2% of the purchase price is common. In competitive markets, sellers expect 3% to 5%, and some hot markets push deposits as high as 10%. On a $400,000 home, that range runs from $4,000 to $40,000, due before you’ve even had an inspection. The amount is negotiable, but offering too little in a seller’s market can make your offer look weak.
You’ll typically send earnest money by wire transfer or cashier’s check, following written instructions from the escrow or title company. Personal checks are sometimes accepted but can delay confirmation that your offer is binding.
What Protects That Deposit Between Offer and Closing
Earnest money is not a gift to the seller. Standard purchase contracts build in contingencies that let you cancel and recover your deposit if specific conditions aren’t met.
- The inspection contingency gives you roughly 7 to 14 days to hire a professional inspector. If the inspection reveals significant problems, you can negotiate repairs, ask for a price cut, or cancel and get your money back.
- The financing contingency protects you if your mortgage falls through. As long as you made a genuine effort to secure the loan, your deposit is refunded if the lender denies the application.
- The appraisal contingency covers you when the home appraises below the agreed purchase price. You can renegotiate, pay the difference, or cancel.
Back out for a reason not covered by a contingency and the seller can usually keep your deposit as liquidated damages. Some contracts go further, allowing the seller to sue for the gap between your contract price and whatever the home eventually sells for, plus interest. Contingency deadlines are real deadlines. Miss an inspection window by a day and you may lose the right to cancel under that contingency.
The Balance Due at Closing
The rest of your down payment is due on closing day. The amount you’ll actually bring to the table is not simply your total down payment minus the earnest money. Your lender must send you a Closing Disclosure at least three business days before closing.1Consumer Financial Protection Bureau. What Should I Do If I Do Not Get a Closing Disclosure Three Days Before My Mortgage Closing This five-page form breaks down your loan terms, projected monthly payments, and every fee you’re being charged.2Consumer Financial Protection Bureau. What Is a Closing Disclosure
The figure to look for is labeled “cash to close.” It takes your total down payment, subtracts the earnest money you already paid, then adds closing costs like title insurance, recording fees, prepaid taxes, and lender fees.3Consumer Financial Protection Bureau. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions (Closing Disclosure) Closing costs generally run between 2% and 5% of the purchase price, so your cash-to-close figure runs noticeably higher than just the remaining down payment. On a $350,000 home with 10% down and $7,000 already deposited as earnest money, you might owe $35,000 minus $7,000 plus $10,000 in closing costs, roughly $38,000 at the table.
Most title companies require this final payment by wire transfer or cashier’s check. Personal checks are refused because the funds can’t be verified as cleared in time. Wire instructions arrive from your closing agent shortly before the appointment.
Getting Your Funds Ready in Time
Lenders don’t just verify that you have enough money. They verify where it came from and how long it has been sitting there. Most mortgage programs require that down payment funds have been in an established account for at least 60 days, a process called seasoning. You’ll provide your two most recent bank statements, and any large deposit inside that window will trigger questions. The lender wants to confirm you aren’t quietly borrowing money that would add to your debt load.
A few weeks before closing, check the daily wire transfer limit with your bank. Many banks cap outgoing wires between $25,000 and $50,000 per day, which becomes a real problem when you need to send $60,000 the morning of closing. Raising the limit or splitting the transfer across days takes advance notice. Expect your lender to pull your credit one more time right before funding. Opening a new credit card, financing furniture, or co-signing someone else’s loan during this window can tank your score and jeopardize the whole deal.
Using Gift Funds
If a relative is helping with your down payment, the lender will require a formal gift letter. For conventional loans, Fannie Mae requires the letter to state the dollar amount, confirm that no repayment is expected, and include the donor’s name, address, phone number, and relationship to you.4Fannie Mae. Personal Gifts FHA loans accept gifts from family members, close friends with a documented relationship, employers, labor unions, charitable organizations, and government homeownership programs. The donor typically has to produce a bank statement showing they had the funds available, and the lender will trace the transfer from the donor’s account into yours. Build time for this paperwork into your schedule; a late or incomplete gift letter can push closing back.
Tapping Retirement Accounts
You can withdraw up to $10,000 from a traditional IRA for a first-time home purchase without the usual 10% early withdrawal penalty. You’ll still owe regular income tax on the distribution, so the full $10,000 doesn’t land in your bank account.5IRS. Retirement Topics – Exceptions to Tax on Early Distributions The exception applies to IRAs, SEP-IRAs, and SIMPLE IRAs, not to 401(k) plans. For a 401(k), your options are a plan loan you repay with interest back into your own account, or a hardship withdrawal that comes with income tax and potentially the 10% penalty. A 401(k) loan that isn’t repaid on schedule converts into a taxable distribution.
Verifying Wire Instructions Before You Send
Wire fraud targeting real estate closings is not a theoretical risk. The FBI’s Internet Crime Complaint Center logged over 9,300 real estate fraud complaints in 2024 with losses exceeding $173 million.6IC3. 2024 IC3 Annual Report The typical scheme has a criminal intercepting emails between you and your title company, then sending fake wire instructions that route your money into the criminal’s account. By the time anyone notices, the funds are usually gone.
Before you wire anything, call your closing agent at a phone number you obtained independently, not a number pulled from the email containing the instructions. Read the routing and account numbers back and get verbal confirmation. If you get a last-minute email changing the wire instructions, treat it as a near-certain fraud attempt. Legitimate closings almost never involve sudden changes to bank account details. One case in the 2024 IC3 report involved a buyer who wired more than $956,000 to a spoofed email posing as their real estate agent; the funds were frozen and recovered only because the fraud was reported within days.6IC3. 2024 IC3 Annual Report
When the Money Actually Changes Hands
Signing the documents doesn’t move the money that instant. After you submit the final payment, the escrow agent verifies that the wire has cleared or the cashier’s check is valid. Once confirmed, the agent disburses funds to the seller, pays off the seller’s existing mortgage, and distributes fees to the various service providers involved.
The title company then records the new deed with the county, which typically takes one to three business days depending on local processing. Recording makes the ownership transfer official in the public record. In most transactions, you receive the keys on closing day as soon as funding is confirmed, though the recorded deed may arrive by mail weeks later. Keep your Closing Disclosure and all settlement documents permanently. You’ll need the Closing Disclosure at tax time, and the settlement records become important if you ever dispute a charge or sell the property.