You’ve done everything right. You accepted an offer, went through inspections, packed your things, and are ready to move on. Then—bam!—you get the call: the buyer’s mortgage didn’t go through.
It’s one of the most stressful scenarios a home seller can face, and unfortunately, it’s more common than you might think. But don’t panic. There are ways to recover, regroup, and still sell your home without losing your mind (or your money).
In this guide, we’ll walk you through:
- Why this happens
- What to do immediately
- Your best options moving forward
- Real-life examples
- And key tips to avoid this situation in the future
Let’s start with the facts.
📊 How Often Do Buyer Mortgages Fall Through?
According to the National Association of Realtors (NAR), around 5% of pending home sales fail to close—with mortgage issues being the top reason for contract failure. That may not sound like much, but when you consider that over 5 million homes are sold annually in the U.S., that’s more than 250,000 deals falling through each year.
In hot markets like Los Angeles, where prices are high and lender requirements are strict, the risk can be even greater.
💥 Why Do Mortgages Fail at the Last Minute?
There are many reasons why a buyer’s loan can be denied late in the process—even on the day of closing:
1. Credit Changes
- Buyer takes on new debt (buys a car, opens a credit card)
- Missed payments during escrow
2. Employment Changes
- Buyer loses their job or switches roles
- Lender re-verifies employment and flags instability
3. Low Appraisal
- If the appraisal comes in low and the buyer can’t cover the difference, the lender might deny the loan.
4. High Debt-to-Income Ratio (DTI)
- Lenders calculate DTI right before closing. Any extra debt or unreported liabilities can kill the loan.
5. Documentation Issues
- Missing bank statements, tax returns, or inconsistent information
6. Lender Issues
- Internal processing errors, funding delays, or underwriter changes
A Real Life Example: Lindsey in Burbank accepted an offer from a young couple. Everything seemed solid, but on the day of closing, the buyer’s lender discovered a new personal loan on their credit report. The mortgage was denied, and the deal was dead, which left Lindsey scrambling at the last minute since she was no longer able to close. It put a lot of extra stress on her because she was no longer able to fulfill the terms of another house that she was buying.
🛑 What to Do Immediately When a Mortgage Falls Through
Before you spiral into stress, take a breath. Then follow these steps:
✅ 1. Talk to Your Agent (or Escrow Officer)
Find out exactly why the deal fell apart. Was it credit-related? A lender issue? Knowing the root cause helps you decide what’s salvageable.
✅ 2. Request Proof in Writing
Ask for a formal denial letter from the lender. This may protect your legal interests and is often required if you’re keeping earnest money.
✅ 3. See If There’s a Backup Buyer
If your agent had strong marketing, there may be other buyers still interested. Reach out fast before they move on.
✅ 4. Determine If the Deal Can Be Revived
In some cases, the buyer just needs a few days to resolve the issue or switch lenders. Evaluate:
- Is the buyer motivated?
- Can they close within a few days to a week?
- Are you willing to wait?
Another Real Life Example: Carlos in Pasadena had a buyer’s loan fall through 24 hours before closing. But his agent had kept the second-highest offer on standby. That buyer stepped in, matched the price, and they closed 9 days later.
🔁 What Are Your Options After a Mortgage Falls Through?
🚨 Option 1: Re-list on the MLS
You can go back to market. This takes time and effort, but if the home had strong interest the first time, you may recover quickly.
Tips:
- Mention the failed financing in private agent remarks to vet better buyers.
- Stage and photograph again if needed.
- Prepare emotionally for a longer process.
⚠️ Option 2: Sell to a Backup Buyer
If you had multiple offers, now’s the time to call the runner-up. They may still be interested—especially if they missed out the first time.
Be transparent about why the original deal fell through. It shows professionalism and helps rebuild trust.
💡 Option 3: Sell to a Cash Buyer
If time is critical (maybe you already bought a new house or need to relocate), consider selling to a cash buyer or investor. No mortgage = no risk of this happening again.
Pros:
- Close in 7–14 days
- No financing contingencies
- Sell as-is (skip repairs, cleaning, showings)
- Avoid double mortgage payments if you’re moving
Cons:
- Likely a lower price than retail, but could be worth it for speed and certainty
Another Real Life Example: Jasmine in Northridge was two weeks from her cross-country move when her buyer’s loan collapsed. She called Mrs. Property Solutions, a local cash buyer, got a fair offer in 24 hours, and closed in 10 days. “It wasn’t what we originally hoped for,” she said, “but we were done and moved on.”
⚖️ What Happens to the Earnest Money
Most buyers put down a deposit (a.k.a. earnest money)—usually 1–3% of the purchase price. Whether you get to keep it depends on the contract and contingencies.
If the loan fell through after the financing contingency expired, you may be entitled to keep the deposit. If not, the buyer might get it back.
Always review your contract terms with your agent or attorney before assuming anything.
📉 How This Affects Your Future Sale
Having a deal fall apart can damage momentum—but it doesn’t have to kill your sale. Be proactive:
- Let future buyers know why the first deal fell through (transparency = trust)
- Get a pre-listing inspection to identify any deal-killing repairs
- Insist on full mortgage pre-approval from buyers—not just pre-qualification
- Shorten contingencies where possible
📈 Real Data on Mortgage Failures & Timing
Here are a few stats that show how fragile the deal can be:
- According to Redfin, 12% of failed contracts in 2023 were due to financing issues.
- Freddie Mac reports that nearly 1 in 10 loans flagged by underwriters are denied due to debt ratio changes.
- In California, average escrow timelines are 30–45 days, meaning a failed deal can delay your plans by over a month.
🧠 The longer a home sits, the more likely you’ll have to lower your price. Speed and certainty matter.
🚀 Final Thoughts: When a Mortgage Falls Through, Don’t Panic
It’s disappointing, stressful, and sometimes expensive—but you are not stuck.
If you’re emotionally or financially exhausted from the process, you may want to explore a direct sale to a cash buyer like Mrs. Property Solutions. We buy houses across Los Angeles (and Southern California) as-is, with no financing, no waiting, and no agent fees.
📞 Want a quick solution? Call or text (602) 376-8391 or fill out this quick form to get a cash offer in 24 hours:
Whether you re-list, re-negotiate, or go cash—we’re here to help you find the best path forward.