Buying a home is one of the biggest milestones in life. From house hunting to securing financing, the journey can feel both exciting and stressful. So when you finally find your dream home, make an offer, and start the mortgage process—only to have it fall through—it can feel devastating.
But here’s the good news: you’re not alone, and in many cases, you can take steps to avoid or fix the situation. As a financial services provider, Starting Gate Financial has helped countless clients navigate mortgage challenges and come out stronger.
In this guide, we’ll explore the most common reasons mortgages fall through, what you can do about it, and how to better prepare for your next application.
The Most Common Reasons a Mortgage Falls Through
Mortgage approvals aren’t guaranteed, even if you’ve received pre-approval. Here’s why deals sometimes collapse before closing.
1. Changes in Your Financial Situation
One of the biggest red flags for lenders is any sudden change in your income, employment, or debt level during the loan process.
Examples:
- Losing your job or switching careers mid-process.
- Taking on new debt, such as a car loan or large credit card purchase.
- A decrease in income due to reduced work hours or commission-based fluctuations.
Tip: Keep your financial situation stable from pre-approval until closing day. If you anticipate any change, talk to your lender immediately.
2. Low Appraisal Value
If the home’s appraisal comes in lower than the agreed purchase price, lenders may hesitate to approve the full loan amount.
Why it matters: Lenders use the appraised value to determine how much they’re willing to finance.
Possible fixes:
- Renegotiate the purchase price with the seller.
- Increase your down payment to bridge the gap.
Request a second appraisal if you believe the first was inaccurate.
3. Credit Score Changes
Your credit score isn’t just checked during pre-approval, it can be reviewed again before closing. A sudden drop can derail your mortgage.
Common causes of score drops:
- Late or missed bill payments.
- Opening new credit accounts.
- High credit utilization.
Pro tip: Keep all payments current and avoid new credit applications during the mortgage process.
4. Debt-to-Income Ratio (DTI) Increase
Your DTI measures how much of your monthly income goes toward debt payments. A significant increase could make you riskier in the eyes of the lender.
Example: Financing new furniture or a car while in escrow can unexpectedly raise your DTI.
Solution: Wait until after closing to make major purchases.
5. Issues with Documentation
Mortgage lenders require extensive documentation, from pay stubs and tax returns to bank statements and proof of assets.
Problems that can occur:
- Missing paperwork.
- Inconsistent information across documents.
- Inability to verify income sources.
Action step: Respond quickly to lender requests and keep your paperwork organized.
6. Title Issues
Sometimes, the property itself causes the mortgage to fall through due to problems with ownership history.
Examples:
- Liens on the property.
- Boundary disputes.
- Unpaid property taxes.
Fix: A reputable title company can help resolve these issues before closing.
7. Changes in Lending Guidelines
Mortgage approval rules can shift due to market conditions, interest rate hikes, or new regulations. This can affect your eligibility even mid-process.
Best approach: Work with a lender who keeps you informed about policy changes and can adapt quickly.
What to Do if Your Mortgage Falls Through
If your mortgage gets denied or canceled, it’s not the end of your homeownership dream. Here’s how to bounce back:
1. Ask for Specific Reasons from Your Lender
Understanding the exact cause will help you address it effectively. Request written details of why the mortgage didn’t go through.
2. Fix the Issue Before Reapplying
- If it’s a credit score issue, focus on timely payments and lowering utilization.
- If it’s an appraisal problem, consider alternative financing or renegotiation.
3. Explore Other Loan Options
Different lenders have different criteria. FHA, VA, or USDA loans might have more flexible requirements than conventional mortgages.
4. Partner with a Financial Expert
Working with professionals like StartingGate Financial can open the door to loan programs that match your specific needs and financial situation.
How to Prevent a Mortgage from Falling Through in the Future
Maintain Financial Stability
Avoid job changes, big purchases, or new debt during the mortgage process.
Get Pre-Approved, Not Just Pre-Qualified
Pre-approval involves a deeper dive into your finances, making it a stronger indicator of success.
Keep Communication Open
Stay in touch with your lender, real estate agent, and any third parties involved.
Work with Experienced Professionals At Starting Gate Financial, we help you understand the mortgage process from start to finish, reducing the risk of unpleasant surprises.
Final Thoughts
A mortgage falling through is disappointing, but it doesn’t have to mean the end of your homeownership journey. By understanding the most common pitfalls and working with experienced professionals, you can prepare for a smoother, more successful application next time.
If you’ve experienced a mortgage setback, Starting Gate Financial is here to guide you with tailored solutions and expert support.