Confused about earnest money versus your down payment when you buy a home in Campbell? You are not alone. These two terms sound similar, but they work very differently and show up at different points in your purchase. In this guide, you will learn what each one is, how they work in Campbell and Santa Clara County, what amounts are typical, and how to protect your money. Let’s dive in.
Quick definitions: earnest money vs down payment
Earnest Money Deposit (EMD) is your good‑faith deposit that shows a seller you intend to move forward. You usually deliver it right after your offer is accepted. It sits in a neutral escrow account and is typically refundable if you cancel within your contract contingencies. If the sale closes, it is credited to your total cash at closing.
Down payment is your actual equity contribution paid at closing. It reduces your loan amount and sets your loan‑to‑value ratio. It does not act as a guarantee and is not refundable after closing. Your EMD is usually applied toward your down payment and closing costs when you complete the purchase.
How it works in a Campbell purchase
From offer to escrow
Most Campbell transactions use the California Association of REALTORS Residential Purchase Agreement. It sets the EMD amount, how you will deliver it, and the deadline to deposit after acceptance. It also sets your contingencies and how they must be removed. You can review high‑level guidance from the California Association of REALTORS.
Where the money sits: escrow
In California, a neutral escrow or title company holds your EMD under written instructions. Funds are handled under strict rules to protect both sides. For background on how escrow and trust accounts work, see the California Department of Real Estate’s escrow and trust account guidance and the American Land Title Association overview of escrow and title.
Contingencies and your EMD safety
Common Campbell contingencies include loan approval, appraisal, home and pest inspections, and document review for condos or HOAs. If you cancel within a valid contingency period and follow the contract steps, the EMD is typically refundable. If you remove contingencies and then back out without a contractual right, the seller may be able to keep the EMD under the contract’s remedy terms, including any liquidated damages clause. For consumer protections and process basics, the Consumer Financial Protection Bureau’s mortgage resources are a helpful reference.
Appraisal gaps and loan denial
If the appraisal comes in below the contract price, you can often cancel under an appraisal contingency, negotiate a price change, or bring extra cash. If your loan is denied while your loan contingency is still in place, you typically keep your EMD when you cancel properly. If you already removed the loan contingency, you risk forfeiting the deposit.
Typical amounts in Santa Clara County
Earnest money ranges
In the South Bay, it is common to see EMDs around 1–3 percent of the purchase price. In hot, multiple‑offer situations, buyers sometimes offer 3–5 percent or more to strengthen an offer. Some listings also set a minimum dollar amount, such as $10,000 or higher. The right number depends on market conditions, the property, and your risk comfort.
Down payment norms by loan type
- Conventional loans: Some programs allow as little as 3 percent down, while many buyers choose 20 percent to avoid private mortgage insurance. See Fannie Mae conventional loan options for background.
- FHA loans: Minimum 3.5 percent down with mortgage insurance. Learn more at HUD’s FHA program page.
- VA loans: Eligible service members and veterans can buy with 0 percent down. Details are on the VA home loan site.
- USDA loans: 0 percent down in eligible rural areas. Availability depends on location and program rules.
If you put less than 20 percent down on a conventional loan, you will usually pay mortgage insurance until you reach a lower loan‑to‑value ratio. For plain‑English guidance on mortgage costs and insurance, visit the CFPB’s mortgage basics.
Local realities that shape your strategy
Santa Clara County’s higher home prices mean even a 1–3 percent EMD is a large dollar figure. Sellers often weigh the strength of your deposit, your proof of funds, and your contingency terms when comparing offers. Appraisal gaps are common when prices move quickly, so be ready to cover a shortfall or to negotiate. If you are looking for assistance, California programs like CalHFA may help qualified buyers with down payment or closing costs, subject to eligibility and funding.
Buyer checklist before you wire your EMD
- Confirm the exact EMD amount and the deposit deadline in your signed purchase agreement.
- Verify the escrow company’s details and get written wire instructions directly from escrow; retain the receipt once the deposit is made.
- Track every contingency, deadline, and the process for canceling or removing contingencies in writing.
- Align with your lender on pre‑approval, appraisal timing, and any funds you may need if an appraisal comes in low.
- If you are offering a larger or non‑refundable deposit, understand the risk if you cannot close.
Seller checklist to protect your position
- Confirm that the contract clearly states EMD amount, deposit deadline, and the chosen remedy clauses.
- Get proof that escrow received the EMD and calendar the buyer’s contingency removal dates.
- Review the buyer’s pre‑approval and ask about appraisal, inspection, and HOA document timelines.
- If a breach occurs, follow the contract steps and consult your brokerage or counsel before seeking to retain the EMD.
Common scenarios and how to respond
Multiple offers and a stronger EMD
If you face competition, a larger EMD can signal confidence. Balance that strategy with realistic contingency timelines so you protect your deposit while still appealing to the seller. Pair it with a strong pre‑approval and clear proof of funds.
Low appraisal on a Campbell home
If the appraisal is low, review your appraisal contingency dates and options. You can ask for a price reduction, bring extra cash, or cancel within the contingency period. Coordinate closely with your agent and lender to model the cash impact.
Loan denial close to contingency removal
If you are not fully through underwriting, resist removing your loan contingency early. If a denial hits after removal, you may lose your EMD. Keep your lender updated on any financial changes and ask for clear milestones before removing contingencies.
HOA documents reveal unexpected costs
For condos or townhomes, review HOA budgets, reserves, and dues during the contingency window. If fees or rules do not fit your plans, you can often cancel within the document review period and preserve your EMD.
Work with a local advisor
Understanding how deposits and down payments work in Campbell helps you make smarter, safer decisions. If you want a clear plan tailored to your price point, loan type, and timeline, connect with a local expert. Schedule a friendly, no‑pressure call with Mariano Peralta to map your strategy from offer to closing.
FAQs
What is earnest money in a Campbell, CA home purchase?
- It is a good‑faith deposit you pay shortly after acceptance, held in escrow and typically credited to your closing funds if the sale completes.
When do you pay the down payment for a Santa Clara County home?
- You fund your down payment at closing, not at offer; it is separate from the EMD and finalizes your loan‑to‑value.
Is earnest money refundable in California if I cancel properly?
- Usually yes if you cancel within your contract contingencies and follow the notice steps, but not after you remove contingencies without a valid reason.
How much earnest money is typical for Campbell buyers?
- Many offers include 1–3 percent of the purchase price, while hot markets can push deposits to 3–5 percent or more depending on strategy.
Who holds my EMD during escrow in Campbell, CA?
- A neutral escrow or title company holds the funds under written instructions until closing or mutual release.
Does my EMD apply to my down payment at closing?
- Yes, your EMD is usually credited toward your total cash to close, including down payment and closing costs.
