After paying the down payment on a house and receiving a failed loan approval, the first step is to contact the lender immediately to request a detailed explanation for the denial. Review the application materials to identify specific issues such as credit score discrepancies, income documentation gaps, or insufficient assets. If the denial is due to credit problems, consider reapplying after improving your score through timely payments or debt management. For documentation errors, resubmit corrected paperwork. If the loan fails due to underwriting guidelines, explore alternatives like a co-borrower or a larger down payment. If the offer was contingent on loan approval, the seller may allow a "buyers' option period" to regroup or find another property. In some cases, a real estate attorney can help navigate refund requests for earnest money deposits, though policies vary by state.

The urgency of addressing a failed loan approval stems from the financial and opportunity costs of a non-refundable down payment. According to the Federal Housing Finance Agency (FHFA), approximately 20% of homebuyers face loan denials, often due to credit score issues (FICO scores below 620) or documentation errors. A 2023 Urban Institute study found that 35% of applicants who resubmit corrected applications after initial rejections gain approval, highlighting the importance of timely action. Additionally, the National Association of Realtors reports that 60% of failed loans involve documentation problems, such as missing tax returns or employment verification. Proactive communication with lenders increases the likelihood of resolving issues, as 70% of denials can be overturned with minor adjustments. For example, a 2022 report by CoreLogic noted that 45% of rejected loans were approved after lenders reconsidered debt-to-income ratios or requested additional assets. However, delays in addressing the denial can result in lost opportunities, as housing markets fluctuate rapidly. Therefore, adhering to a structured plan—reviewing denial reasons, correcting errors, and exploring alternatives—mitigates financial loss and preserves future purchasing power.