Earnest money is the amount of money a buyer puts into an escrow account. These funds are held in an Escrow account until you close on your home. Earnest money protects the seller if the buyer backs out of a sale. Earnest money protects both parties by setting the terms and conditions of the earnest money refund. It also provides remedies for both parties in case of a breach of contract or dispute. At the closing, earnest money generally applies to the buyer's deposit toward their mortgage down payment.