What to Do if Your Mortgage Fell Through on Closing Day

You’ve worked so hard to get your home ready for sale and to put it on the market, the last thing you want is for the sale to fall through on closing day. Unfortunately, as a seller, a lot of the reasons a house sale goes bad at the last minute is due to problems on the buyers side. Get familiar with these 9 reasons why a pre-approved buyer could still fall through on closing day and learn what you to do if it happens to you. The last thing you need to be thinking about when you are ready to sign for your house sale is what if your buyer’s mortgage fell through on closing day.

Appraisal

A real estate or residential appraisal report

One issue that you have a little control over is the appraisal. Getting your own appraisal before you put the house on the market is a good step towards ensuring the house sale doesn’t fall through based on a low appraisal. If you set your home sale price based on the market alone you could potentially be in for a surprise when the lenders appraisal comes back lower than your asking price. If the home is valued at less than the amount you are selling then it can hold up or stop the sale process all together.

In order for the sale to go through it would require lowering your selling price so the loan isn’t canceled or for the buyer to pay cash to make the difference.

Home Inspection

Like the appraisal, getting your own home inspection report can help to uncover any surprises long before closing day. Your buyer may be working with a lender that requires a home inspection before approving the loan and if that home inspection comes back with problems — especially if the buyer and seller don’t agree on who should pay to fix them — then the closing will be delayed.

To avoid this issue get a home inspection before selling your home and either be transparent about any potential problems or take care of them yourself before listing the home. This can get expensive but it can protect you from having a mortgage fall through on closing day.

Remorse

Buyers remorse is a real thing. A home is a big purchase and not just because of the money involved so if a buyer gets cold feet they could back out at the last minute. The buyer will lose the earnest money that they put down on the house but if they are having second thoughts losing a little money is better than making a decision they will regret.

There is no real way to avoid this type of problem, just be prepared to put your home back on the market in this scenario.

Document Errors

Homeowners and buyers are delaying the sale of the house to correct errors in the legal mortgage documents. 

Believe it or not, even a misspelled name on all the legal mortgage documents can stop a home from closing on time. The good news is that this kind of problem will not stop the sale of the home, simply cause a delay while new paperwork is prepared.

Be flexible and don’t get too attached to closing day, problems can occur at the last minute but in some cases the home sale still can go through.

Job Loss or Change

If the person purchasing your home faces job loss or even a change of jobs in between the time they got pre-approved for a loan and the time of closing on a loan then the mortgage could fall through. Getting pre-approved from a bank requires paystubs and employment verification and changing jobs will start that document-gathering process all over again. A bank will often contact the sellers employer the day before closing to verify their employment and if the seller lost their job in the interim then the bank will not approve the mortgage.

Unfortunately this one is out of your control as the home seller, job loss in a buyer will stop the sale from going through while job change could just delay or push out closing day while they verify the new employment.

Change in Credit

If the buyer makes a large purchase (like a car) OR applies for more credit during the lending process then the red flags fly and there will be issues with the lender either stopping or delaying closing day. When a buyer is pre-approved for a loan they have been pre-approved based on the financial information they gave to the bank. A big purchase changes the debt-t0-income ratio and may alert the bank that they are at higher risk of defaulting with less money now to go towards paying back the mortgage. The same applies to a seller who applies for more credit — this will lower the buyers credit score and could signal to the bank that the seller is worried about making all their payments and probably can’t really afford this house after all.

Both of these issues are out of control for the seller and could delay or stop the house sale from going through.

Title Problems

Any problems with your title can cause closing delays. Do you have any debt to contractors, liens on your home or outstanding property taxes? Any of these holdups on your title will slow down the closing until they are rectified. The lender will do a title search and be able to determine if the title is clear or if you need to address any outstanding liens or claims before closing.

If you know you have a lien or unpaid taxes take care of that before selling, if you’re not sure if any past issues on your title have been taken care of then reach out to your lender to make sure you’re in the clear before selling.

Final Walk-Through

A house owner and buyer shake hands over a deal or an agreement.

The final walk-through can be a deal breaker in some cases. If you made an agreement to repair certain parts of the home and you did not follow through with that then a buyer can legally back out if it was all documented in writing in the closing documents. If a problem came up during the closing process and something big breaks or gets damaged then the seller wouldn’t know until the final walk-through and could change their mind. Buyers aren’t usually too keen on purchasing a home that requires immediate repairs so any last minute issues could cause the mortgage to fall through on closing day.

Avoid this issue by following through on any promises you made and contracts drawn up during the closing process. If something big breaks (the air conditioning, the basement floods, etc) then notify the buyer right away so you can come up with a solution that works for both of you.

Documents Missing

The buyer is responsible for sending a Closing Disclosure to the lender at least three days before closing. These documents outline the terms of the buyers loan and all closing costs so if the Closing Disclosure is late to the buyer then the closing will not go through on time.
Thankfully this is a case of a simple delay and it’s not likely your mortgage will fall through in this scenario.

All of these things can be the cause of why a buyer’s mortgage fell through on closing day. Now you are in a bad spot to get your home sold, and I can help you.

What to do if your loan fell through the day before closing?

So what are your options if the loan falls through at the last minute? Well, as you can see some situations are within your control to avoid or quickly deal with. Unfortunately there are other costly and last minute situations that put you at the mercy of your buyer. If you are in a time crunch or a situation that requires closing as soon as possible then hoping for the best may not be in your best interest. You may even be aware of certain factors that could delay or stop your closing like liens or problems that will show up on an inspection, in these situations it could be in your best interest to work with a non-traditional buyer. Gary with Gary Buys Houses is a trusted home buyer in the state of Utah and he’s able to pay cash, close quickly and his closing isn’t delayed by liens and house problems (big or small). Contact Gary today if your buyer’s mortgage fell through on closing day and see how quickly he can purchase your home, as-is, and avoid having a house fall through on closing.

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