When the buyer writes the contract they state how many days before they have to complete their mortgate application, complete their inspections, and order an appraisal. It is the buyer and their Realtor's responsibilty to keep things moving along and do their best to hit those deadlines. Most sellers are happy to extend those time periods because the sale is in their best interest. It would be unusual for a seller not to "play ball" with the buyer if something doesn't happen on time unless there are other circumstances not mentioned here or the seller has decided not to move forward and is using this as a vehicle to stop the sale.
Dlywarrior, Your question says "Drop out of Contract". You would have to look at the contract to see under what conditions the seller can cancel the contract. A contract should explain the requirements and responsibilities of the Buyer and Seller.