Here's What Happens When You're Selling a Home and Your Buyer's Mortgage Falls Through

Most people can't afford to purchase a home outright. That's where mortgages come in.

If you're trying to sell your home, you might end up getting an offer from a buyer whose closing is contingent on getting a mortgage. If that's the case, in many situations, that mortgage will come through just fine and there won't be a problem. But if your buyer's mortgage ends up falling through, you'll generally be back to square one. 

Why might a mortgage fall through?

There are different reasons why a buyer might ultimately be unable to finalize their mortgage. Let's say your buyer applied for a home loan at a time when their income was $75,000 a year, only to lose their job right after that application and get a new one paying just $65,000. A mortgage lender may not be willing to finalize that loan because it's worried your buyer now doesn't earn enough money to keep up with their ongoing payments. 

It could also be that your buyer was delinquent on some bills after applying for their mortgage and their credit score took a dive. That could be enough for a lender to pull a mortgage offer.

In that situation, it may be that your buyer has the option to pay for your home in cash. If so, and they opt to do that, you can move forward with the deal. But otherwise, you'll basically have to start over and look for a new buyer. And unfortunately, that puts you at a disadvantage, because the longer a given home sits on the market, the more bargaining power other buyers get.

And if you're wondering whether you're protected financially in this situation, the answer is that most home purchase agreements come with a mortgage contingency clause stating that if a buyer can't secure a home loan, they can walk away from the deal and get their deposit back. So in that case, you don't get much recourse as a seller.

A good way to avoid losing your buyer due to mortgage issues

If you're worried about accepting an offer on your home only to have the deal fall through due to an inability on your buyer's part to finalize a mortgage, the solution is simple -- try to get a cash buyer. In 2022, a good 36.1% of home sales were cash-only, according to EZ Home Search. And these days, cash offers are also more appealing to buyers who have the money because mortgage rates are so high.

Of course, this doesn't guarantee that you're going to be able to find a cash buyer. So your next best bet may be to try to find a buyer who's at least been pre-approved for a mortgage. 

This doesn't guarantee that their loan will be put in place, because things could change between the time of the pre-approval and when the mortgage is ready to be finalized. But it at least tells you that your buyer's finances have been looked at by a lender, and they were in a good position at that moment to purchase a home.