A LOI is typically used as a "starting place" for negotiations on a property. Generally a LOI will be followed up by a formal Purchase Agreement after the terms are settled on. This may or may not be the case in your area, but is a good use of the two documents.
Earnest money deposits are not legally essential to an offer to purchase, however, the buyer's earnest money deposit tends to dramatically increase the likelihood of closing. The seller is more receptive to the Offer to Purchase and the buyer is showing their commitment to the sale. Earnest money deposits of ŭꯠ to บꯠ on smaller transactions are typical. As a rule of thumb, the earnest money should be 10%┫% of the down payment.