To refund a down payment when a mortgage application is denied, review the real estate contract for earnest money terms, contact the lender or listing agent to initiate the refund process, and provide required documentation such as proof of denial. Most contracts outline refund timelines, typically 10–30 days, unless the borrower breached terms.

The refund process hinges on contractual obligations and regulatory guidelines. The Federal Trade Commission (FTC) mandates that sellers refund deposits within 72 hours of a valid denial notice, provided no违约 (breach) occurred. Data from the National Association of Realtors (NAR) shows 60–70% of deposits are refunded promptly when denials stem from issues like insufficient income, not the borrower’s fault. However, disputes arise in 10–15% of cases due to ambiguous contract language or unmet conditions. For example, a 2022 NAR report noted $500 million in annual deposit refunds, with 85% processed within 30 days. Lenders often expedite refunds to avoid liability under the Truth in Lending Act (TILA), which requires clear communication of denial reasons. Proactive documentation and adherence to state-specific laws (e.g., California’s Civil Code § 1704) further ensure compliance and minimize delays. Thus, understanding contractual terms and regulatory frameworks is critical to resolving down payment disputes efficiently.