If you’ve ever sold a house — or tried to — you’re already familiar with the stress than can come along with the home selling process. From preparing for showings to getting those final documents signed, selling a home the traditional way involves so… many… steps.
But once you’ve made it to the home stretch, you’re golden — right?
Unfortunately, many things can go wrong right up to closing. All too often, a buyer’s financing is the pain point. In fact, according to the National Association of Realtors, more than 30 percent of closing problems are related to buyer financing.
Here’s what to do when a mortgage falls through on closing day.
Why Would a Buyer’s Financing Fall Through?
Home sales fail for many reasons. Perhaps the home inspection brings unexpected problems to light. Maybe the title search uncovers outstanding liens or debts — surprise! The buyer may not feel like you’ve met all their contingencies, or perhaps they just get cold feet and walk away.
But by far, the most common problems that sink home sales are related to funding; buyer financing issues are responsible for more than a third of closing delays.
Unfortunately, they’re largely out of your control. Let’s look at some common reasons why a buyer’s mortgage might fall through on closing day.
Change in Employment
Certain types of mortgage loans require certain lengths of employment, either with the same employer or in the same career field. For instance, if the buyer is a nurse and they leave their nursing position at one hospital and take a nursing position at another hospital, the lender may not see that as a deal-breaker.
But a nurse who suddenly switches to a whole new industry may be a red flag to underwriters.
Negative Credit Report Item
While you don’t need perfect credit to get a mortgage loan, your score does need to meet a lender’s standards. Any negative items on a credit report can tank the loan. If a seller has been pre-approved — or approved — and they skip a payment, their score may fall below the lender’s limits and negate the loan.
New Debt
Lenders also consider debt when approving (or denying) a loan. If a lender decides to take out a car loan or adds a new credit line after getting a mortgage pre-approval, this raises their debt load. This may cause lenders to deny the mortgage.
What to do if a Buyer’s Mortgage Fell Through on Closing Day
The sad truth is that you can’t control your buyer’s financial behavior. Whether they take out a large car loan, max out their credit card, or lose their source of income during the closing process, financial changes may make the lender nervous.
You can take steps earlier in the home selling process to protect yourself, namely working with buyers that are pre-approved for a mortgage, rather than pre-qualified.
The two may sound similar, but, as explained by Zillow, pre-qualification is simply a first step, while pre-approval involves document review and a credit check. However, neither guarantees the mortgage loan will be approved.
You can’t keep your buyer from deciding they must have a brand new car while the sale is closing. You can’t ensure that they don’t lose their job.
One bit of good news as explained by Realtor.com: You may be able to keep the earnest money deposit if the sale falls through.
If you find yourself in this situation, you are back to square one, so you typically are left with a few options:
- Find a new buyer
- Wait for your current buyer to come back with a new offer
- If you need to sell quick, sell your house to a cash buyer
If the buyer’s financing falls through or you don’t want to take that risk, you can sell your home to a buyer who doesn’t need to worry about financing.
HomeGo will provide a firm offer that’s funded with cash. No need to worry about a mortgage falling through on closing day due to any financing concerns.
Instead, you’ll enjoy an easy, hassle-free sale that closes in as few as 7 days, with less of the stress.
