After making a down payment, if a loan approval fails, the borrower should first contact the lender to understand the specific reasons for denial. Review the application materials for errors or missing documents and request a detailed explanation. If the denial is due to credit score changes, financial instability, or documentation gaps, the borrower may need to reapply with updated information or improve their financial standing. Negotiating alternative loan terms, such as a higher down payment or shorter repayment period, could also be an option. If the lender cannot resolve the issue, exploring other lenders or loan types, such as government-backed programs or private lenders, may be necessary.

This situation often arises due to stringent underwriting criteria or unexpected changes in the borrower’s financial status. For example, a 2023 Federal Reserve report found that 18% of mortgage applications were denied after initial approval due to updated credit checks or income documentation issues. Similarly, the Consumer Financial Protection Bureau (CFPB) noted that 25% of loan rejections post-down payment occur because lenders identify inaccuracies in initial applications. Economic downturns, like those during the COVID-19 pandemic, have exacerbated these challenges, as lenders tightened requirements to mitigate risks. Additionally, a 2022 study by the Urban Institute revealed that 15% of homebuyers faced loan denials after submitting a down payment because of fluctuating property appraisals or insufficient reserves. Proactive communication with lenders and meticulous preparation of financial documents are critical to overcoming such setbacks.