Yes, a buyer can typically return the down payment if they cannot secure a loan, provided the purchase agreement allows cancellation and the seller is notified promptly. The refundability depends on the terms outlined in the real estate contract, such as cancellation clauses, deposit conditions, and deadlines for loan approval. If the contract specifies that the down payment is refundable upon cancellation, the buyer must follow the stated procedures, including submitting a written notice and adhering to timelines. However, if the buyer breaches the contract without justification, the seller may retain the deposit.

In the United States, real estate transactions are governed by state and federal laws, including the Federal Real Estate Settlement Practices Act (FRSPSA) and the Uniform Commercial Code (UCC). The American Bar Association (ABA) reports that 60-70% of down payment disputes involve misunderstandings about cancellation terms. For example, the National Association of Realtors (NAR) notes that approximately 15% of home purchases involve loan denials, often due to credit issues or insufficient funds. When buyers cancel before closing, escrow agents typically return the deposit unless the contract specifies otherwise. State laws also play a role; California, for instance, requires sellers to return deposits if buyers cancel within three days of signing the contract. Data from the CFPB reveals that 22% of homebuyers face loan approval delays, but most resolve these issues before cancellation, ensuring deposit refunds. Ultimately, clear communication and adherence to contractual terms are critical to retaining or returning the down payment.