You've made an offer on a home, the seller accepts it, and then your agent says: "Now we need your deposit."

Wait. Is that the down payment?

This is one of those homebuying terms that can be surprisingly confusing, especially because people sometimes use "deposit," "earnest money" and even "down payment" when talking about money a buyer puts toward a purchase.

But for a Massachusetts buyer, it's helpful to think of your deposit and your mortgage down payment as two different things.

What Is a Deposit?

A deposit is money you provide as part of your agreement to purchase the property.

In Massachusetts, deposit funds held by a real estate broker or attorney must be placed in an escrow account and kept separate from the broker's own money. The funds remain in escrow until the transaction closes or the agreement is otherwise terminated and the funds can be properly released.

Most importantly:

Your deposit isn't an extra charge on top of the price of the house.

If you purchase the property, the deposits you've already paid is credited toward the money you owe for the purchase.

Think of it as money you've paid earlier in the transaction, rather than additional money you're paying for the house.

When Do I Pay the Deposit?

Your exact deposit amounts and deadlines will be spelled out in your contracts, so don't rely on a generic timeline you found online.

In a typical Massachusetts transaction, however, there usually are more than one deposit.

A buyer usually provides an initial deposit in connection with the Offer to Purchase. A larger additional deposit is often due when the Purchase and Sale Agreement, commonly called the P&S, is signed. Your agent and attorney should make sure you understand how much is due, when it is due and where it needs to go.

How Much Is the Deposit?

There isn't one required deposit amount for every Massachusetts home purchase.

The deposit is part of the terms negotiated between buyer and seller. Massachusetts consumer guidance specifically notes that deposit amounts are negotiable. The appropriate amount can depend on the particular transaction, the terms of the offer and what the buyer and seller agree to.

This is one reason you should know before making an offer not only how much money you have available for your eventual down payment and closing costs, but also how much cash you'll need available earlier in the transaction for deposits, home inspection, and appraisal.

So What's the Difference Between a Deposit and a Down Payment?

Here's the easiest way to think about it:

• Your deposit is part of the purchase contract.
• Your down payment is part of how you're financing the purchase.

Suppose you're purchasing a home for $400,000 and your mortgage plan calls for a 10% down payment. Your down payment would be $40,000.

Now suppose you've already paid $20,000 in deposits during the transaction. These deposits are credited toward your purchase.

In this simplified example, you've already put $20,000 toward the transaction, so the remaining amount needed to reach your $40,000 down payment would be $20,000. Of course, that doesn't mean $20,000 is all you'll need at closing. There are closing costs, prepaid expenses, adjustments and other amounts due, and these vary from transaction to transaction.

Your lender and closing attorney will calculate the final amount you'll need to bring to closing.

What Happens to My Deposit If the Transaction Doesn't Close?

This is where your contracts becomes extremely important. Your offer and Purchase and Sale Agreement may contain contingencies and other provisions governing what happens if the transaction doesn't proceed.

Depending on the circumstances and the terms of your agreements, a buyer may be entitled to the return of deposit funds. In other circumstances, the deposit may be at risk.

And if the buyer and seller disagree about who is entitled to the money, the escrow holder generally can't simply decide which party should receive it. Massachusetts advises consumers to pay particular attention to the contract provisions governing deposit disputes. This is one reason we encourage buyers to have a Massachusetts real estate attorney involved in the purchase process.

Your deposit is real money, and you should understand the contract terms governing it.

Don't Move Money Until You Know Exactly Where It's Going

Unfortunately, real estate transactions are also targets for wire fraud.

Never send deposit or closing funds based solely on instructions you receive by email.

Before sending money, confirm the instructions using a trusted phone number you've independently verified. If anything about payment instructions changes unexpectedly, stop and verify before sending funds. Taking an extra few minutes to confirm instructions is considerably easier than trying to recover money sent to a fraudulent account.

Plan for Deposits Before You Make an Offer

Buyers understandably spend a lot of time thinking about the down payment.

But some of that money may need to be available well before closing day.

Before you make an offer, we'll talk through the proposed deposit structure so you understand:

• How much you're offering as a deposit
• When each deposit will be due
• Who will hold the money
• How the deposit fits into the total funds you'll need for your purchase

You shouldn't discover after your offer has been accepted that a substantial amount of money needs to be available shortly.

Deposit and Down Payment: Different Jobs, Same Purchase

If all these terms start blending together, remember this:

The deposit is money you put into the transaction while you're under contract.

The down payment is the portion of the purchase price you're paying from your own funds rather than financing with your mortgage.

And the money you've already paid as deposits doesn't disappear. When the transaction closes, those funds are accounted for as part of the money you've already contributed toward the purchase.

Buying a home involves moving a lot of money at different stages, and you shouldn't be expected to automatically know what every payment is called or when it's due.