Home closings can be delayed by new credit, large purchases, appraisal or title issues, payment mistakes, and paperwork delays. Buyers who communicate promptly and stay proactive can avoid most problems.
Adam Godby (NMLS #2286643) is a Loan Officer and Team Lead at First Residential Independent Mortgage (NMLS #1907), a Springfield, Missouri-based national lender. Equal Housing Opportunity. First Residential is a registered DBA of Mortgage Research Center, LLC, an affiliate of Three Creeks Media.
Most of the time, when a home’s closing gets delayed, everything still works out. Everybody adjusts to the new closing schedule. The buyer still moves into the home, just a little later than planned.
But sometimes, a closing delay means you don’t get to buy the house after all.
That’s why, as a loan officer, I do everything I can to keep closings on schedule, and it’s why homebuyers should also avoid creating delays. Let’s talk about what causes closing delays and how to avoid them.
New Credit Accounts Can Delay Closing
I recently had a client who, just days before closing, went shopping at a big box hardware store. At the register, the cashier invited my client to open a new store credit card. My client said, "Sure, why not?"
Opening this new credit account, just days before the client’s mortgage was set to close, delayed the closing. We had no choice but to work the new store credit card into the loan file. Those store credit cards don’t provide statements immediately, so this took a few days.
Fortunately, this family could still afford the mortgage payment, even with the new credit card in the mix. And, fortunately, the home’s seller, though frustrated, was willing to stay the course while we sorted all this out.
But not every delay ends like this. What if the seller had received a better offer after going under contract with my client? The delayed closing could have allowed the seller to toss out the contract and pursue the higher offer.
Or what if the new debt pushed the borrower’s debt-to-income ratio out of approval range? That could kill the file or cause the borrower to have to repay the new debt before closing.
How to avoid this delay: Always check with your loan officer before applying for any kind of new credit, even if it’s just a $50 purchase put on a new store credit card. Also, talk to your loan officer before making big purchases on a credit card you already have open. This includes moving company deposits and new furniture purchases.
Large Cash Purchases Can Delay Closing, Too
Spending money from your savings account could also delay a home’s closing. Mortgage lenders check bank accounts during the underwriting process. Sometimes, having cash reserves in the bank makes the loan easier to approve.
If a loan’s approval leans on the borrower’s healthy cash reserves and then the borrower spends those reserves, we’d have to rethink the loan’s approval. This could take a few days, delaying the scheduled closing.
How to avoid this delay: Just like with opening a new credit account, borrowers should always check with their loan officer before spending money from savings. It may be OK to spend the money, but always check first.
Appraisal, Title, and Insurance Surprises That Derail Closings
Of course, buyers can’t control every step in the homebuying journey. Delays can come from:
A Low Home Appraisal
A lender can’t approve a mortgage that exceeds the value of the home you’re buying. The home appraisal, which is done by an independent appraiser during underwriting, confirms that the home is valuable enough to support the size of the loan.
If the appraisal comes in too low, your closing could be delayed while you figure out what to do next. You may need to make a bigger down payment or negotiate with the seller for a lower purchase price.
Homeowners Insurance Delays
To get a mortgage approved, the new home must first be insured. Naturally, delays in getting insurance coverage can delay a home’s closing. Delays might happen if the insurer asks for some complicated repairs or if the homebuyer waits too long before seeking coverage.
Title Disputes
A title company will research the ownership history of the home to ensure the seller has the legal right to sell it. Occasionally, the title search reveals some unfortunate surprises.
One time, the title search showed that the home my client was buying was in probate. The sellers had put the house on the market, accepted my client’s offer, and attempted to close even though they didn’t legally own the property. This closing was delayed for months while the home went through the probate court.
How to avoid these kinds of delays: Some delays, like the one I described above, can’t be avoided. But most of the time, borrowers can prevent delays by promptly uploading documents and answering questions from their mortgage company.
Somebody Else’s Closing Could Delay Your Closing
If you’re selling and buying a home at the same time, and using money from the sale as a down payment on your new home, you’ll have two closings to keep on track.
Let’s say the buyer of the home you’re selling fails to turn in paperwork and delays that closing. Without the down payment money, you won’t be able to close on the home you’re buying, either.
In reality, a chain of closings may be longer than two transactions. Three or four closings may be linked together. One delayed closing can create a domino effect, causing delays in all the other closings, including yours.
How to avoid this delay: You can’t keep someone else’s homebuying process on track. But you can do your best to keep your transaction on track so you’re not the source of other people’s delays. You’re already on the right track by reading this article!
Wire Transfers, Closing Funds, and Missing Money
I’ve had clients bring personal checks to closing to cover their down payment and other costs. This will delay closing, at least for a couple of hours, while somebody drives to the bank for a cashier’s check. The delay could take longer if the buyer’s bank doesn’t have local branches.
Along with cashier’s checks, wire transfers can be used for the down payments and closing costs. I usually recommend making the wire transfer the day before closing. Buyers should always make sure they’re following wiring instructions from the title company or closing attorney. Buyers have been defrauded by receiving fake but convincing wire instructions.
I’ve also heard of borrowers using gift funds for their down payment or closing costs experiencing delays because the gifted money came from a different account than expected on closing day. Homebuyers who use gifted funds should make sure the donor uses the account described in the gift letter.
How to avoid this delay: Use wire transfers and cashier’s checks, following the title agent or closing attorney’s specific instructions. Make sure gifted money comes from the account stated in the gift letter.
Coordination Chaos — The Role of Agents, Attorneys, and Escrow
So many moving parts come together to make a real estate closing happen. Money has to flow in many directions at once. Depending on your state’s laws, this process will be coordinated by an attorney’s office, a title agency, or an escrow service.
Most of these people do a fantastic job. If you’re responsible for choosing the closing attorney or title agent, you’ll want to find someone with plenty of experience. Your loan officer or Realtor can share their thoughts on the best closing services in the area.
However, even the best service providers can make mistakes or overlook important steps. If you notice something that could cause a delay, ask about it. Asking questions could prevent a delay in closing. As the buyer, you’re leaving the closing with a big, decades-long commitment to the new home. You have the right to ask questions if you don’t understand something.
How to avoid this delay: Sometimes, by asking a simple question, you can prevent a big problem. Ask questions and point out concerns even if you don’t fully understand why you’re asking.
As the buyer, you’re leaving the closing with a big, decades-long commitment to the new home. You have the right to ask questions if you don’t understand something.
Other Causes for Closing Delays
Other common reasons for closing delays include:
Problems with IDs: If the name on your photo ID has changed since you applied for the loan, even if it was just a last name change because of marriage, this could delay the closing. The name on your ID must match the name on the loan application.
Incomplete repairs: You’ll probably do a walkthrough before closing to make sure the home is all set and that any repairs you negotiated have been made. If something comes up during the walkthrough, you may need to delay closing.
Not enough money: Some buyers miscalculate and don’t have quite enough money in the bank to cover the down payment or closing costs. Pay close attention to the Closing Disclosure to make sure you’re prepared for all your expenses on closing day.
Things like this can happen, but by being proactive, buyers can identify many of these problems before closing day and avoid delays.
Recovery Mode: When a Delay Happens Anyway
Sometimes, even when you do everything right, closing day gets delayed anyway. Maybe it was a domino effect from a different closing, or maybe it was something totally out of left field, like the seller I mentioned earlier who didn’t have the right to sell the home.
When this happens, all you can control is how you react to the delay. Most of the time, the home will still close. Even that house in probate worked out eventually. In that scenario, the buyers were able to move into the home and pay rent for a few months while the property's probate status got resolved.
The key is to stay calm and flexible. Almost always, both parties still want the deal to work out, and that makes a huge difference. Yes, there may be some difficult decisions, especially if your lease is expiring and you have nowhere to live during the closing delay. But if you still want the house and the seller still wants to sell it, you can likely still get there.
Closing Day Success Stories — What It Looks Like When It All Goes Right
When everything goes right, a home closing seems uneventful. The buyer signs a big stack of papers and leaves with keys to their new home.
Of course, a seamless closing only seems uneventful. In reality, making all the moving parts work together for a common goal takes a lot of work.
The money that makes all this happen flows from the lender and the buyer to the seller, but some of it is also diverted to Realtors, professional service providers, tax authorities, insurance companies, and, sometimes, government agencies.
Even if your closing hits a snag that causes a delay, just stay calm and keep the end goal in mind. In most cases, you can get back on track.
