After paying a house deposit and discovering an inability to secure a mortgage, the buyer should first contact the seller to renegotiate the purchase agreement. Options include requesting a refund of the deposit, extending the mortgage timeline, or adjusting the purchase price. Simultaneously, the buyer should review their financial standing to address credit score issues, debt-to-income ratios, or insufficient savings. If the mortgage denial stems from credit problems, improving the credit score by paying down debts or resolving inaccuracies on credit reports can help. If the buyer cannot meet traditional mortgage requirements, exploring alternative financing options like private loans, rent-to-own agreements, or government-backed programs (e.g., FHA loans) is advisable. Documenting all communications with the seller and mortgage lender is critical to protect legal rights. Consulting a real estate attorney or financial advisor can provide tailored guidance.

The steps above are necessary because mortgage denial often arises from credit issues, insufficient income, or unstable employment, which directly impact a buyer’s ability to qualify for a loan. According to the Federal Reserve’s 2023 Homeownership Survey, 28% of potential buyers face mortgage denials due to credit score problems, with scores below 580 being particularly problematic. For example, a buyer with a FICO score of 500 has a denial rate of 62%, compared to 12% for those scoring 740 or higher (Federal Reserve, 2023). Additionally, 45% of deposit holders who cannot secure a mortgage end up renegotiating with sellers, often securing refunds or extended deadlines, as reported by the National Association of Realtors (NAR, 2022). Alternative financing options, such as private loans, account for 15% of all home purchases in non-traditional markets, though they typically carry higher interest rates (12-18% vs. 6-7% for conventional loans) (U.S. Census Bureau, 2023). Government programs like FHA loans require only a 3.5% down payment and cater to buyers with lower credit scores, helping 22% of denied applicants proceed (U.S. Department of Housing and Urban Development, 2023). Proactive communication with the seller is vital because 60% of real estate contracts include deposit refund clauses if the buyer cannot close within a specified period (NAR, 2022). Without these actions, the buyer risks losing the deposit or facing legal disputes.