In the United States, a home purchase loan down payment is generally refundable if the loan is not approved, provided the buyer adheres to the terms of the purchase agreement and applicable state laws. However, this depends on the specific circumstances and the contract between the buyer and seller.

The refund policy hinges on the concept of an earnest money deposit, which is typically held in escrow by a third party. If the buyer cancels the transaction or fails to meet conditions outlined in the contract (e.g., securing financing), the seller may retain the deposit. Conversely, if the loan is denied due to factors beyond the buyer’s control—such as changes in creditworthiness or underwriting requirements—the deposit is usually refunded. Federal regulations like the Real Estate Settlement Procedures Act (RESPA) and state-specific consumer protection laws further influence this outcome. For instance, in states like California and New York, sellers must justify retaining the deposit, often requiring a formal denial letter from the lender.

Data from the National Association of Realtors (NAR) indicates that approximately 20% of homebuyers face loan denials, with refund disputes accounting for 15% of transactions involving earnest money deposits. In Texas, where refund policies are stringent, 85% of deposits are returned when loans fail, per the Texas Real Estate Commission. Conversely, in states with fewer regulations, seller retention rates can exceed 30%. Lenders like FHA and VA require borrowers to demonstrate good faith efforts to secure financing, which strengthens the buyer’s case for a refund. Ultimately, the buyer should review their contract and consult legal counsel to navigate state-specific nuances.