If you find that you can't close the loan, that puts your earnest money deposit -- the money you've placed in escrow -- at risk. You may forfeit your deposit, or you may be able to get all or most of it back. It depends on the circumstances and how your sales contract was written.
If your sales contract made the deal contingent on being able to get financing and for some reason you didn't qualify for a mortgage, you should be able to get your escrow money back. If your contract didn't include a financing contingency or if you didn't cancel before the contingency deadline, you probably will lose your money.
Not Your Fault
You should be able to recover your money if not closing the loan isn't your fault. If the house failed inspection or the appraisal was far below the sales price, you should be able to recover your deposit. A clause in your sales contract should specify a date for final inspection; if that deadline isn't met, you should be able to cancel without penalty.
If you can't close the loan because of some reason beyond your control, like being called for military service or a medical emergency or death in the family, the seller may agree to return your money, even if the situation isn't covered in the contract. You may have to pay the seller a cancellation fee in such cases.
It's possible to ask the seller for an extension if you simply can't close on the specified date but think you might be able to close later. If a lender denies your mortgage application and you don't have time to make an alternate arrangement before the scheduled closing, ask the seller to delay it until you can get a loan. Unless the seller has another buyer standing by, you'll usually get an extension.
- Home Finder: Making an Earnest-Money Deposit
- Realty Times: You Can Lose Money Without Contract Contingencies
- Find Law: Battles Over Real Estate Escrow Deposits
- Ryan Real Estate Group: HUD Questions
- First Time Homebuyers: Questions and Answers on Earnest Money
- Rain City Guide: Should You Lose Your Earnest Money?