Earnest money funds are usually applied to a loan’s closing costs or to the down payment. Since VA loans don’t require a down payment and closing costs are normally paid by the seller, many VA loan recipients end up putting that money toward closing costs and prepaid items or even getting it all back.
Keep in mind that as a buyer, you want to gain as many seller concessions as possible from the seller. The best way to start any relationship is with a showing of goodwill. An ample deposit serves this purpose, and places buyers in a great position to negotiate more favorable contract terms.