Earnest money is the good-faith deposit a Texas buyer delivers to the title company after the contract is signed. On the current TREC resale contract, you have 3 days after the effective date to deliver it, along with the option fee, to the escrow agent named in the contract. It's held in escrow, credited toward your down payment and costs at closing, and refunded or released under the contract's terms if the deal ends. There's no standard amount in Texas. It's whatever you and the seller agree to write in.
How earnest money works in a Texas contract
Most Fort Worth resales use the TREC One to Four Family Residential Contract (Resale), TREC No. 20-19, the form dated 05-04-2026 and effective for use July 1, 2026 (TREC 20-19). Paragraph 5 sets the rules for earnest money and the termination option:
- Within 3 days after the effective date, you deliver the earnest money and the option fee to the escrow agent named in the contract, usually the title company. They're made payable to the escrow agent and can be paid separately or in one payment.
- The contract can also require additional earnest money by a later date you fill in.
- If the last day to deliver falls on a Saturday, Sunday or legal holiday, the deadline moves to the end of the next day that isn't one.
- Money the escrow agent receives is applied first to the option fee, then to the earnest money, then to any additional earnest money.
- Time is of the essence for Paragraph 5, so strict compliance with the deadlines is required.
Counting the 3 days
Count from the effective date, which is the date filled in when the last party signs and acceptance is communicated. The effective date is day zero. If a contract becomes effective on a Thursday, Friday is day one, Saturday is day two and Sunday is day three. Because Sunday is excluded, the deadline moves to Monday, and if Monday is a legal holiday, to Tuesday. Delivering early is always fine.
What happens if the money is late or short
If you don't deliver the earnest money on time, the seller may terminate the contract or use the seller's default remedies under Paragraph 15, or both, by notice to you before you deliver it (Paragraph 5C). If you don't deliver the option fee on time, or no option fee amount is written in, you don't have the unrestricted right to terminate (Paragraph 5D).
A short payment is a quieter problem. Because the escrow agent applies money to the option fee first, sending one check for less than the total can leave you with a valid option and underfunded earnest money. Confirm both amounts with your agent, confirm the title company's delivery method, and get receipts showing what was applied to each.
Who holds it and what the lender wants
The escrow agent holds the money and follows the contract and the parties' signatures. Under Paragraph 18, the escrow agent isn't a party to the contract, isn't liable for interest on the deposit, and can require good funds before disbursing.
The lender's interest is narrower: where the money came from. Earnest money is part of your funds to close, so expect to show it cleared your account, such as the statement showing the withdrawal or a copy of the cleared check, and the title company's receipt.
- Fannie Mae: if the deposit is part of your minimum contribution, the lender must verify it came from an acceptable source. A verification of deposit or bank statements must show the average balance for the past two months was large enough to support it (Selling Guide B3-4.3-09).
- FHA: the lender must verify and document the deposit and its source if it exceeds 1 percent of the sales price or is excessive based on your history of saving, using a canceled check, the deposit holder's receipt, a verification of deposit or statement showing a sufficient average balance, or electronic verification (HUD 4000.1 II.A.4.d.i(A)).
If the earnest money came from a gift or an account that appears nowhere else in your file, the source needs the same paper trail as any other money. See large deposits and gift funds.
Earnest money vs. option fee vs. down payment
- Earnest money is the good-faith deposit. It's held in escrow, applied at closing, and refunded or released under the contract if the deal ends.
- The option fee buys your unrestricted right to terminate during the option period. It goes to the seller. The contract lets the escrow agent release it to the seller at any time, and it's credited to the sales price at closing. If you terminate, you don't get it back.
- The down payment is the part of the price you pay from your own funds instead of the loan. It's set by the loan program and structure. Earnest money is usually applied toward it.
Earnest money at closing
Paragraph 18B says that at closing, the earnest money is applied first to any cash down payment, then to your expenses, and any excess is refunded to you. On the Closing Disclosure it appears as a deposit in the Calculating Cash to Close table and in your column of the Summaries of Transactions. It reduces what you bring at closing by the same amount. It doesn't change what you pay for the house, it just makes sure the money already sent is counted once.
When the deal doesn't close
- You terminate during the option period, by notice before 5:00 p.m. local time on the last day: the earnest money is refunded and the option fee stays with the seller (Paragraph 5B). TREC publishes a Notice of Buyer's Termination of Contract, TREC No. 38-8, for this (TREC 38-8).
- You terminate under another contract right, such as the Third Party Financing Addendum's Buyer Approval or Property Approval paragraphs, within their deadlines: the addendum says the earnest money is refunded (TREC 40-11).
- You default without a valid right to exit: the seller may enforce specific performance or other relief, or terminate and keep the earnest money as liquidated damages (Paragraph 15).
- The seller defaults: you may enforce specific performance or other relief, or terminate and receive the earnest money (Paragraph 15).
Getting the money released
Termination and release are separate steps. Under Paragraph 18C, either party or the escrow agent can send a release for both parties to sign. If one party won't sign, the other can make a written demand. The escrow agent sends a copy to the other party, and if no written objection arrives within 15 days, the escrow agent may disburse to the party who made the demand, less unpaid expenses. Under Paragraph 18D, a party who wrongfully refuses to sign an acceptable release within 7 days of the request can be liable for damages, the earnest money, reasonable attorney's fees and costs. The escrow agent may also deduct authorized expenses before releasing funds. Keep copies of your termination notice and the release.
How much earnest money to offer
No Texas law or TREC rule sets the amount, so I won't print a "typical" percentage. What shapes the number in practice:
- Competition: in a multiple-offer situation, a larger deposit can signal commitment to the seller.
- Your protections: the more contract rights you keep, such as the option period and the financing addendum, the less of the deposit is actually at risk.
- Your cash: the deposit comes out of the same money you'll need for the down payment and closing costs, so it should come from funds you can document.
- Your agent's read of the local market and the listing.
On the loan side, the size of the deposit doesn't change your approval. It's just part of your total funds to close, and a larger deposit means a bigger item to source.
Protecting your earnest money
Most lost earnest money comes from missed deadlines, not bad luck. Write down the option period end date and time, the Buyer Approval deadline in the financing addendum if you have one, and any appraisal addendum deadline. Finish inspections and insurance quotes early in the option period. Tell me right away if anything in your finances changes, so we can act while you still have a contract right to use.
Fictional example
This example is made up. Luis signs a contract on a Crowley home with $3,000 earnest money and a $300 option fee, effective on a Wednesday. Day three is Saturday, so his deadline moves to Monday. He wires $3,300 to the title company Friday after confirming the wiring instructions by phone. The title company applies $300 to the option fee and $3,000 to earnest money. His FHA lender asks for the bank statement showing the wire and the title company's receipt, because the deposit is over 1 percent of the price. At closing, the $3,000 is credited toward the cash he needs to close, and the $300 option fee is credited to the sales price. If he'd wired only $3,000, the option would be paid in full and his earnest money would be $300 short.
Common mistakes and myths
- "There's a standard earnest money amount in Texas." There isn't. It's negotiated.
- "The lender releases the earnest money." The escrow agent does, under the contract.
- "I get the option fee back if I walk away." You don't. You get the earnest money back if you terminate correctly.
- "Business days count." The contract counts days, with only the final delivery day moved off a weekend or legal holiday.
- "One payment covers it." It can, but a short payment funds the option fee first.
- "Wiring instructions in an email are safe." Always confirm them by calling the title company at a number you found yourself.
What to have ready
- Which account the earnest money will come from. Using an account already in your loan file keeps the paper trail short.
- How the title company accepts deposits, with wiring instructions confirmed by phone.
- Your delivery deadline, counted from the effective date as day zero.
- The title company's receipt, saved where you can send it to me.
- Gift documentation, if any part of the deposit is a gift, prepared before the money moves.
Next step
About to write an offer? Tell me how much earnest money you're planning and where it's coming from, and I'll make sure it's sourced the way your loan program wants before you wire it, so it helps your offer instead of becoming an underwriting condition. Schedule a call, or when you're ready, start an application.
Related questions
Sources
Links checked Oct 21, 2026.
- TREC One to Four Family Residential Contract (Resale), TREC No. 20-19, Paragraphs 5, 15 and 18 (form dated 05-04-2026, effective 07/01/2026): https://www.trec.texas.gov/forms/one-four-family-residential-contract-resale
- TREC 20-19 form PDF, Paragraphs 5A to 5E, 15, 18B to 18D (05-04-2026): https://www.trec.texas.gov/sites/default/files/pdf-forms/20-19_4.pdf
- TREC Notice of Buyer's Termination of Contract, TREC No. 38-8 (effective 04/01/2025): https://www.trec.texas.gov/forms/notice-buyers-termination-contract
- TREC Third Party Financing Addendum, TREC No. 40-11, Paragraph 2 (form dated 11-04-2024, effective 01/03/2025): https://www.trec.texas.gov/forms/third-party-financing-addendum-0
- Fannie Mae Selling Guide, B3-4.3-09 Earnest Money Deposit (topic dated 05/04/2022, retrieved Oct 21, 2026): https://selling-guide.fanniemae.com/sel/b3-4.3-09/earnest-money-deposit
- HUD Handbook 4000.1, II.A.4.d.i(A) Earnest Money Deposit (TOTAL) (Update 17, issued Nov 26, 2025, the version in effect today; Update 18, issued Aug 12, 2026, may be adopted now and must be used by Nov 10, 2026, and does not change the rules cited here): https://www.hud.gov/sites/default/files/OCHCO/documents/40001-hsgh-Update-17.pdf
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026