Closing on a new home can be both an exciting and stressful time. While it’s tempting to get the champagne ready, remember, the property isn’t yours yet.
With OVM, the most common situation is that everything goes according to plan. However, the process for getting a mortgage is a big transaction with multiple steps in the process. Each stage of the transaction needs a double check to ensure all parties are happy.
Some common reasons that prevent a house from closing include:
Defects in the home
Most house purchases involve a home inspection and if that reveals defects this could lead to the house purchase falling through or being delayed if the buyer has second thoughts.
Some house purchases have a home inspection contingency clause as well. This means that if the inspection reveals serious problems, the buyer can back out without any penalty.
Sometimes the appraisal may confirm that the house is worth more/less than the initial offer. If all parties are not in alignment on the home’s true value it may mean the buyer and seller have to renegotiate or back out of the purchase.
Someone gets cold feet
At any point in the buying/selling process, one party could get cold feet and decide to back out. Even once the contracts are signed, there are sometimes justifiable reasons for the buyer or seller to back out without penalty, so it’s not always an airtight guarantee that the house is yours at this stage.
Financing falls through
If you are purchasing a home with a mortgage, getting financing is crucial to the whole process.
Even once pre-approval is granted, a change in financial circumstances since may cause the lender to reevaluate. That’s why it’s best to avoid new job changes or taking on new debts during the house buying process.
The property is not insurable
Another reason a house purchase may fall through is if there’s an issue with the property which makes it uninsurable.
This can happen if the previous homeowner made a significant insurance claim on the home, leading insurance providers to consider coverage to be too risky.
If your home is not insurable, it often means that lenders will not approve a mortgage. The only way around this is if you are a cash buyer.
What happens if a house doesn’t close by the closing date?
If the lender decides against approving the loan by the closing date, it could mean the purchase contract will expire.
Most sales contracts allow for a standard extension of up to 10 days. Beyond that, if the house won’t close by the closing date, all parties will need to agree on a new closing date. They can sign an addendum to reopen negotiations if all parties are still willing to move forward with a transaction.
While the seller may agree to delay this to give the buyer extra time, they are under no obligation to do so which could mean the sale falls through.
Sometimes there’s nothing you can do about a house falling through. The best thing to do is be prepared for all steps of the mortgage and buying process. Learn more about what happens if a house doesn’t close by the closing date.
If you’re ready to buy a home, we can show you how to get a pre-approved home loan and help you find the best loan product for your purchase!