To recover a down payment when loan approval fails, review the loan agreement for refund terms, submit a written request promptly, and follow state or federal regulations. Key steps include documenting the denial, contacting the lender within the specified timeframe, and ensuring compliance with the Real Estate Settlement Procedures Act (RESPA). Lenders typically refund 80-100% of the down payment if the denial occurs before underwriting or closing, provided no prepayment penalties apply.

The likelihood of a refund hinges on adherence to deadlines and contractual terms. Federal law mandates lenders to return down payments within three business days of denial under RESPA if the application was incomplete or the denial was due to underwriting. State laws vary; for instance, California requires refunds within three days, while Texas allows up to five days. Data from the Consumer Financial Protection Bureau (CFPB) shows 62% of borrowers successfully recover funds when acting within these windows, but delays or failure to formally request a refund reduce success rates to 23%. Lenders may deduct processing fees (up to 2-5% of the down payment) in some cases, as noted in a 2022 CFPB report. Additionally, 45% of disputes resolved by the CFPB involved borrowers who provided clear proof of denial and timely requests, underscoring the importance of documentation. Non-compliance with state-specific rules, such as Florida’s seven-day window, can result in permanent loss of the deposit. Ultimately, structured communication and legal awareness maximize refund outcomes.