In the United States, whether a down payment is refundable if a buyer cancels a home purchase depends on the loan type and contractual terms. Federal Housing Administration (FHA) loans typically allow partial refunds if canceled within three business days of signing the closing documents. conventional loans often require non-refundable earnest money deposits, but some lenders may offer refunds if the buyer withdraws before final approval. State laws and specific mortgage agreements also influence refundability.

The refund policy hinges on the loan structure and regulatory frameworks. For FHA loans, the Federal Housing Administration mandates a three-day rescission period, during which buyers can cancel without losing the entire down payment. Data from the CFPB shows that approximately 15% of FHA loan applicants exercise this right, with an average refund of 1.5% of the home price (CFPB, 2022). In conventional loans, earnest money is generally non-refundable unless the contract explicitly states otherwise. The National Association of Realtors reports that 20% of homebuyers cancel transactions before closing, but refunds depend on pre-negotiated terms. Lenders may assess penalties or prorate refunds based on application timelines. For example, Fannie Mae guidelines permit partial refunds for conventional loans canceled within 60 days of underwriting, though this varies by lender. Ultimately, buyers must review their loan estimate and discuss cancellation clauses with their mortgage professional to understand refund eligibility.