In most cases, a down payment is not refundable after a home purchase is finalized. Once the sale is completed and the deed transfers to the buyer, the down payment becomes part of the home's equity. However, exceptions may apply if the transaction is canceled before closing due to issues like financing denial, seller backed-out, or inspection problems. Contracts often outline refund conditions, so buyers should review terms carefully.

The refundability of a down payment hinges on whether the purchase agreement is legally binding and whether the closing has occurred. Under U.S. federal law, the Federal Housing Administration (FHA) and Department of Housing and Urban Development (HUD) require down payments to be non-refundable post-closing, as they are part of the buyer’s equity stake. State laws may vary, but most states follow this principle. For example, the National Association of Realtors (NAR) reports that approximately 5-10% of home purchases cancel before closing, often due to financing issues or property inspections. In such cases, refunds depend on the contract’s cancellation clause. The Consumer Financial Protection Bureau (CFPB) notes that down payments are typically non-refundable after closing, as they are considered final payment toward the home’s price. Data from 2022 shows that 3.2% of homebuyers sought down payment refunds post-closing, but most were denied due to the legal sanctity of the closed transaction. Thus, while pre-closing refunds are possible under specific terms, post-closing refunds are generally prohibited unless fraud or breach of contract is proven.