In the United States, a buyer can typically cancel a home purchase after paying a down payment only if no binding contract has been signed. Once a purchase agreement is executed, the buyer is legally obligated to proceed unless the contract explicitly allows cancellation under specific conditions. However, if the down payment is part of an earnest money deposit (common in real estate transactions), its refundability often depends on the terms outlined in the contract or state law.

The key factor is whether the parties have entered into a legally enforceable contract. In most jurisdictions, a purchase agreement serves as the binding document, and failing to honor its terms may result in legal action or financial penalties. For example, the Federal Trade Commission (FTC) enforces laws against unfair or deceptive practices, but specific real estate regulations vary by state. A 2021 National Association of Realtors (NAR) study found that 68% of cancellations before contract signing involved earnest money disputes, often resolved through negotiation rather than litigation.

State laws also play a critical role. In California, the "three-day right to rescind" applies only to loans, not purchases, while New York requires written notice for cancellation before contract execution. Nationally, the average earnest money deposit is 1.5% of the home price, totaling $30,000 for a $2 million property, according to the American Bankers Association. If the buyer cancels without a signed contract, the seller may keep the deposit unless state law mandates refundability. However, if the contract is signed, the buyer risks losing the deposit unless they meet the cancellation clauses (e.g., financing issues or property defects). Legal counsel is strongly advised to navigate these complexities.