Your mortgage fell through on closing day? What to do now

Imagine being in the final stages of closing on a house and your mortgage falls through. As a homebuyer, few things could be more discouraging. If something delays your loan or your application is denied, don’t panic. It is possible to get a new mortgage lender, but because real estate contracts usually have a deadline, it will be challenging to find a lender and complete underwriting in time to hold the deal together.

What can cause a home loan to fall through?

There are many reasons a mortgage might denied or delayed despite getting preapproved. Here are some potential reasons home loans fall through.

1. You financed a big purchase

Using credit to finance a major purchase after mortgage preapproval will affect your debt-to-income ratio. Your DTI ratio shows how much of your income is earmarked to pay debts. You can calculate your DTI ratio by adding up your monthly debt payments and dividing it by your monthly pre-tax income. Most lenders prefer a DTI of 36% or less to approve a mortgage.

Your best bet is not to make a large purchase while you’re applying for a mortgage. But what should you do if you already made a big purchase? Consider talking to your lender about your options. You may need to return to the drawing board and reconsider the purchase price of your home.

What to do now: If your mortgage was denied due to a big purchase, start by reviewing your finances and speaking with your lender. You may need to pay down some of your debt to lower your DTI ratio or explore alternative loan options. If your lender can’t move forward, consider delaying your home purchase until your financial situation improves. Sometimes, looking for a more affordable home that fits your new financial standing may be the best option.

2. You applied for more credit

Applying for new lines of credit after preapproval is a red flag to lenders. Any time you apply for credit, your credit score takes a hit. You can prevent this by taking on no new debts and avoid making significant changes to your financial situation.

What to do now: Talk to your lender, check your credit report, pay down your debt, hold off on more credit applications, consider alternative loan options, or pause your home search if needed until you can strengthen your financial situation.

If your credit score is the problem — your lender’s required by law to let you know why you've been turned down for a loan — you need to re-build your credit score. You can build up your credit score by taking a multi-pronged approach:

• Pay off outstanding debt
• Pay your bills on time
• Avoid applying for too much credit
• Check your credit reports for errors
• Keep old accounts open
• Deal with delinquencies
• Consolidate your debts

3. Job change or loss of employment

A career change can also make a mortgage fall through. If you decide to start a business, lose your job or get demoted, your lender might believe you might be at risk of defaulting on your loan. Underwriters who check your employment status before closing must do their best to ensure your income can support a monthly mortgage payment.

What to do now: The best thing you can do to prevent a job change to from nullifying your mortgage is to be open with your lender about the change as soon as it happens. Your employment changes might not be a deal breaker. However, if your lender says you're not qualified for a mortgage, they may ask you to wait for a time to show you have adequate income from your new job.

4. A low home appraisal

A low home appraisal can delay or stop your funding in its tracks. An independent state-licensed appraiser will determine a home's fair market value during an appraisal. A low home appraisal occurs when the appraiser's assessment of the home's fair market value is lower than the agreed-upon offer amount. Unfortunately, when this happens, a lender cannot finance the full loan because the loan amount exceeds the home's fair market value.

What to do now: Recognize that a house that fails to appraise means that an expert believes the price you’ve offered is too high, a significant warning that you should perhaps pass on the house. However, if you really want the house, your options are to renegotiate the sale price to match the appraisal, cover the difference in cash at closing, or challenge the appraisal with sales data.

You may also be able to get around this obstacle by offering a larger down payment or asking the seller to lower their asking price.

5. Home inspection revealed major problems

A home inspection can reveal unanticipated, expensive repairs that delay or halt closing. Some of the major issues that can crop up include damaged wiring, roofing problems, HVAC or plumbing issues, drainage problems, structural damage, or poor home maintenance overall.

What to do now: If this happens and you’ve included an inspection clause in your purchase agreement, you should cancel the sale unless you can convince the seller to make repairs to your satisfaction or lower the price enough to compensate you for the cost of repairs. Be aware that the first option might take a significant amount of time and is out of your control. If you don’t get a satisfactory response from the seller, it’s best to back out of the transaction.

6. Problems with the title search

A title search, which looks at public records for a property, also can reveal problems. For example, liens on the house can delay or nullify the sale. Liens are legal claims against a property that use it as collateral for other debts. A lender won’t finance the mortgage if there are title issues like this.

What to do now: Sellers should pay off any outstanding loans, debts, or taxes tied to the home before listing it. Buyers must insist that the seller clear the title because no lender will provide financing until it’s done.

7. Closing delayed due to documentation

Incorrect information or missing documents can delay the closing process. Paperwork errors, such as wrong addresses, misspelled names, and extra fees can delay closing. One issue might be a missing disclosure form. The lender or title company should send the form to the buyer three days before closing. Staying in communication with the lender until closing can prevent delays.

What to do now: Work with your real estate agent and lender to list all documentation required at closing at least a week in advance. You can even share this prep with the sellers and their agent.

Mortgage loan fell through before closing day: FAQs

Let's look at several lingering questions you may still have about your mortgage falling through upon closing.

How often do closings fall through?

Most home sale closings go through just fine. According to the National Association of REALTORS^®, however, about 6% of contracts were terminated, per their January 2025 survey. The same study found that 14% of contracts were delayed, and 7% of contracts were delayed specifically due to appraisal hiccups.

Can a loan fall through after clear to close?

Yes, a loan can still fall through after you’re cleared to close. Clear to close means your lender has established you’ve met all the requirements to close on the loan. However, a number of the obstacles discussed above could still cause a loan to fall through before closing day, even if you’re clear to close.

Do I get earnest money back if my mortgage falls through on closing day?

You can get your earnest money back if you have a contingency in place, complete with an offer on a home and a purchase contract with the contingencies included. You may lose your earnest money if you don't have a contingency in place.

How long can you delay closing on a house?

There is no maximum "time limit" on a closing delay. However, if the seller has implemented a right of refusal contingency or a kick-out clause, the seller may be able to enact one of these and cancel the sale. It also depends on what is written on the mortgage contract. Some contracts allow you a few extra days to get lingering issues sorted out.

Can I change a loan on a house last minute?

Borrowers may want to modify their loan terms before closing, such as securing a better interest rate or adjusting the loan amount. However, any changes require a reassessment of their financial profile, which can delay the process and add costs like reappraisal fees.

Switching lenders before closing is possible but restarts the loan application process, leading to potential delays, additional costs, and credit score impacts. Real estate contracts and rate lock agreements may also be affected, risking penalties or contract termination. Any of these delays or complications can scare the seller and cause them to put the property back on the open market.

The Bottom Line: Close with confidence

In some cases, a mortgage falling through is out of your hands. But sometimes sellers unknowingly make changes that can delay or even jeopardize the closing of a real estate contract. To ensure this doesn’t happen to you, avoid making large purchases or taking on new debt, maintain or increase your income, keep credit card balances low, maintain a strong credit score, and respond to lender requests quickly. Work with your realtor to be sure that you have all the documents you’ll need for a smooth closing.

Ready to check out your mortgage options? Start the approval process with Rocket Mortgage®.