Financing Denied After You’re Under Contract: What Are Your Options?
If you’re under contract to buy a house and your financing was denied, you still have options. What happens next depends on your contract terms, timing, and how quickly you act.
💡 Quick Answer
If financing is denied after you’re under contract, you may be able to cancel the contract, request an extension, switch lenders, or renegotiate — depending on your financing contingency and deadlines.
📌 Why Financing Can Be Denied After Going Under Contract
Many buyers assume financing is “locked in” once an offer is accepted. In reality, final loan approval often happens after the contract is signed.
Common reasons financing is denied at this stage include:
- Issues discovered during underwriting
- Property appraisal problems
- Income or employment changes
- Credit or debt changes after application
- Loan program requirements not being met
📄 The Role of the Financing Contingency
Most purchase contracts include a financing contingency that protects buyers if they cannot secure a mortgage.
If financing is denied within the contingency period, buyers may be able to cancel the contract and later document the termination with a mutual release.
- Cancel the contract without penalty
- Recover their earnest money deposit
- Walk away legally
Once the contingency expires, options may become more limited.
📌 Your Options If Financing Is Denied
1️⃣ Request an Extension
Buyers can ask the seller for additional time to secure financing. Sellers may agree if the deal is otherwise strong and progress is being made.
2️⃣ Apply With a Different Lender
Some denials are lender-specific. Switching lenders or loan programs may resolve the issue, especially if the problem is structural rather than financial.
3️⃣ Renegotiate the Contract
If the denial is tied to the property value or condition, buyers and sellers may renegotiate price, repairs, or credits to make financing viable.
4️⃣ Proceed With Alternative Financing
In limited cases, buyers may use temporary financing or cash and refinance later — but this carries additional risk and cost.
5️⃣ Cancel the Contract
If no solution is available and protections apply, cancellation may be the safest option.
💰 What Happens to Earnest Money?
Whether you recover your earnest money depends on:
- Financing contingency language
- Whether deadlines were met
- Documentation of the financing denial
Missing deadlines or waiving contingencies can put the deposit at risk.
📌 What Buyers Should Do Immediately
- Review the contract and financing contingency dates
- Request a written denial from the lender
- Communicate promptly with the seller or agent
- Avoid making unilateral decisions without clarity
Time-sensitive decisions are critical once financing issues arise.
📌 Summary
- Financing can be denied even after going under contract
- Your options depend on contract terms and timing
- Extensions, lender changes, or renegotiation may help
- Financing contingencies protect buyers when used correctly
Buying or Selling Without an Agent?
Brokerless helps buyers and sellers navigate financing risk, contract terms, and next steps — without traditional commission pressure.