Last updated on April 5th, 2025 at 07:39 pm
You have decided it’s time to buy a new home. Stop there. Before you start looking and hiring a real estate agent, you must evaluate your financial situation well in advance of applying for a pre-approval letter. We cover the entire process starting about six months out. Let’s eliminate the reasons sales fail. This article offers excellent reasons why buyers need the services of real estate agents, more in this article.
A large percentage of buyers fail to close for the reasons listed below which usually boil down to two things. 1. Lack of knowledge of the process 2. Lack of adequate preparation. Follow our recommendations in this article and your chances of closing will be greatly improved.
🚨 Why Real Estate Sales Fail—And How to Avoid It Before You Even Apply for a Mortgage
Real estate sales often fall through—even with a signed contract and an eager buyer. From title issues to financing collapses, a lot can go wrong. This article outlines critical steps to take before you ever sign a purchase agreement or begin working with a real estate agent to find a new home.
🔍 Start Preparing at Least 60–180 Days Before Your Loan Application
If you’re planning to apply for a mortgage loan, don’t wait until the last minute to get your financial house in order. Lenders, mortgage loan originators, and underwriters scrutinize your entire financial life—and the closer you get to the closing date, the more rigid and exacting the closing process becomes.
✅ 1. Check Your Credit Early—Fix Errors Before You Apply
Start at least 60 days before applying for pre-approval. If a loan amount is mistakenly showing as unpaid, or a credit card shows a late payment you actually made on time, take immediate steps to correct the report. Disputes and fixes can take weeks—or longer.
🚫 2. Avoid Major Purchases or New Debt
Hold off on buying:
- A car
- A boat
- A motorcycle
- A motor home
Even with excellent credit, large new loans or leases can wreck your debt-to-income ratio and raise red flags with the mortgage lender. Wait until after the final documents are signed at the closing table.
💸 3. Don’t Move Money Around
Avoid transferring money between accounts within 60 days of your loan application. Lenders require a clear paper trail of necessary funds, especially those used for your down payment and closing costs. Large unexplained deposits or withdrawals from your bank account can delay or deny your approval.
🏦 4. Prepare Your Closing Funds in Advance
Make sure your escrow agent and mortgage company can clearly see your estimated down payment, closing costs, and reserves in:
- Bank accounts
- 401(k)s
- IRAs
If you plan to receive a gift of funds from a relative, such as a parent, have those funds deposited at least 60 days prior to your loan application? Also, obtain a gift letter stating that the funds are not a loan.
📅 5. Be Aware of Statement Timing
If you apply for a mortgage on the 15th of the month, the lender will likely request the two most recent bank statements—which could span back 90 days. So don’t assume that a 60-day freeze on financial activity is enough. The 90-day window is a common review period.
To be safe:
👉 Make all financial changes 120–180 days before your application—this includes:
- Paying off debt
- Selling stocks
- Depositing large sums
This reduces the chance that something will trigger a lender’s review—or worse, an underwriter’s suspicion.
🧾 Bonus Tips:
- Use a cashier’s check or certified check for your final payment—personal checks aren’t accepted at closing.
- Make sure your earnest money deposit and purchase contract terms align.
- Consult a real estate attorney if there’s any uncertainty about the legal documents, title insurance, or deed of trust.
- The title company, escrow officer, or settlement agent will guide you through the final loan documents, including the mortgage note and promissory note.
Before Committing to a Purchase Agreement
Before committing to a purchase agreement for your new home, it’s essential to understand the financial requirements and responsibilities involved in real estate transactions. From the earnest money deposit to the closing date, every step of the closing process requires preparation and attention to detail. Here’s what you need to know to avoid costly delays or surprises:
Verifying Funds and Lender Requirements
Most mortgage lenders require that any funds used for your down payment, closing costs, or other transaction-related expenses be in your account for at least 60 days—a practice known as seasoning. Lenders verify this through bank statements, and any large deposits must be sourced and explained. If you plan to use funds from a retirement account, be aware of the withdrawal process and timing.
Borrowed funds—such as personal loans or credit card advances—are generally not permitted to be used for a home purchase, except in cases where the funds come from a verified loan against a retirement account (e.g., 401(k)). Even then, full documentation is required. Get this part of your work done months ahead of applying for a loan, it’s another key reason sales fail.
Gift Funds from Family Must Follow Guidelines
If a family member is helping with the down payment, the money must be a gift, not a loan. A signed gift letter must confirm the funds are not expected to be repaid, and the mortgage lender may request further documentation to verify the source and transfer of the gift. Sales fail all of the time due to this issue. People trying to manipulate the process. Underwriters often see through this.
Earnest Money Deposit and Escrow Accounts
The earnest money deposit is typically made when the purchase agreement is signed. This shows good faith and commitment to the transaction. These funds are usually held in an escrow account managed by the title company or closing agent, and they will be credited toward your down payment or closing costs at settlement.
Pre-Approval Is Not Optional
Securing a pre-approval from a mortgage lender before making an offer on a property is crucial. Without this, you risk entering into a purchase agreement and discovering weeks later that the loan cannot be approved—often due to income verification issues, credit scores, or insufficient funds. This delay can affect your closing date and jeopardize the entire real estate transaction. This is an important reason why offers are not accepted causing an otherwise good sale to fail.
Understanding the Closing Process
Once your offer is accepted and financing is in motion, the title company will begin a title search to ensure there are no legal claims or liens on the property. During this time, a real estate attorney may be involved in reviewing documents, especially in states where an attorney is required.
You’ll receive a closing disclosure at least three business days before your scheduled closing date, detailing your final loan amount, interest rate, closing costs, and other financial terms. Carefully review this document and ask questions if anything is unclear.
Funds for Closing: Know the Rules
On or before the closing date, you’ll need to bring your remaining funds (the balance of the down payment and closing costs) in the form of a certified check, cashier’s check, or wire transfer, depending on your closing agent’s requirements. Personal checks are almost never accepted for closing. Confirm acceptable payment methods well in advance.
Final Steps and Title Transfer
At closing, the deed of trust will be signed, and title insurance will be issued to protect you and your lender from any unforeseen title issues. Once everything is signed, the title officially transfers to you—congratulations, you’re a homeowner!
🚨 15 Common Reasons a Mortgage Loan Falls Apart Before the Closing Date
In real estate closings, even a seemingly solid purchase agreement can fall apart before the final documents are signed at the closing table. A prospective buyer might have pre-approval and their earnest money deposit in escrow, but a lot can still go wrong. Here’s what can derail the closing process and cause a home purchase to fall through—especially before the closing date. These are only some reasons why sales fail.
1. Buying a Car or Taking on New Debt
A sudden significant change in your debt load before the closing date can impact your loan terms and make your loan amount ineligible. Even a new monthly payment can disqualify your loan application, especially if your mortgage loan originator based approval on your earlier debt-to-income ratio. One of the most common reasons sales fail.
2. Charging Large Expenses on Credit Cards
If you charge furniture or appliances for your new home, your credit score or DTI ratio might change enough for your mortgage lender to rescind the offer. That’s true whether the loan is through a credit union, bank, or mortgage company.
3. Unexplained Transfers In or Out of Your Bank Account
Any mysterious wire transfer or large deposit into your escrow account or checking account could raise red flags. Lenders require full required documentation for all necessary funds used in a home sale. Another key reason sales fail.
4. Opening a New Credit Account
During the closing process, avoid applying for new credit—even for a “good idea” rewards card. It affects your credit and might alter the terms of the contract.
5. Job Loss or Employment Changes
Changing employers or losing your job before the time of closing can make you ineligible for the mortgage terms you were approved for. The lender must re-verify your employment just before closing.
6. Unverifiable Income or Retirement Funds
If you’re using retirement income and it cannot be documented properly, your loan documents could be rejected. This also applies to VA loans or other loan types. A key reason sales fail.
7. Missing Funds for Down Payment or Closing Costs
If your closing disclosure reveals you’re short on the down payment, closing costs, or reserves, the mortgage lenderwon’t proceed. Make sure you have a certified check or cashier’s check ready—personal checks won’t cut it.
8. Appraisal Issues
A low home appraisal can affect your loan amount. If the home’s purchase price is higher than the appraised value, you may need to renegotiate the purchase contract or cover the gap in cash.
9. Title Issues or Unclear Property Ownership
If the title company or settlement agent finds a lien or problem during the title search, your real estate attorney or escrow officer must resolve it before you can secure a clear title or finalize ownership of the property.
10. Delays in Delivering Legal Documents
Closing documents, including the promissory note, mortgage note, and deed of trust, must be executed correctly. Errors, missing signatures, or slow delivery by a mobile notary can delay the final step.
11. Changing the Amount of Earnest Money
Any alteration in the amount of earnest money without an amendment to the sales contract can raise concerns. Be sure the earnest money deposit matches what’s in the purchase agreement.
12. Switching Banks or Accounts
Changing the bank for your down payment or lender’s funds close to the closing date can slow down the process. The escrow company may need to re-verify the origin of the funds.
13. Property Inspection Problems
If the home inspection contingency or pest inspections turn up major issues, the buyer may back out, or renegotiate the terms of the contract—causing delays or cancellation.
14. Real Estate Agent Commissions or Attorney Fees Discrepancy
Disputes over real estate agent commissions or attorney fees can hold up real estate sales, especially if they aren’t properly accounted for in the closing disclosure.
15. Insurance or Tax Issues
Failure to obtain homeowners insurance or provide proof of paid property taxes can delay or cancel a closing. These are non-negotiable requirements in most loan documents.
✅ Pro Tips for a Smooth Closing:
- Avoid any loan application changes once submitted
- Communicate with your closing agent, title company, or escrow agent regularly
- Always verify your legal right to transfer or take ownership rights
- Prepare your legal documents ahead of time
- Ask questions about your mortgage terms and the type of loan
When is it time to find a Real Estate Agent?
Now that you have read the above, you have a great idea of what you must do well in advance of applying for a loan. Your real estate agent will be able to help you only if you have done the things above. When you meet your real estate agent to sign a representation agreement, you must provide them with the following:
- Letter of pre-approval from a financial institution for the highest amount they will finance.
- Obtain a letter from the financial institution where your down payment and closing costs are deposited. The letter must state the amount of funds that are available. If some funds are in a brokerage account obtain a statement.
- Provide your social security numbers and copies of your driver’s licenses so that your agent knows who they are working with.
Now you are ready to visit properties that are within your means to purchase as verified. Good Luck.Why Real Estate Sales Fail — What Every Agent Should Help Their Clients Avoid. Check out this article written for buyers to help choose the best real estate buyers’ agent.
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