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Question: Are closing delays common? We’re selling our home. The good news is that we have a buyer. The problem is that closing will be delayed because of a mortgage issue. What can we do?
Answer: Closing delays are fairly common. According to the National Association of Realtors (NAR), contracts typically closed in 30 days in its September 2026 REALTORS Confidence Index.
How Often Do Closings Fall Through?
What about the rest of the closings? In that survey, 16% of contracts had delayed settlement and 7% were terminated in the prior three months. These are rolling three-month shares reported by NAR members, not a full-year count.
What these numbers tell us is that closing delays are fairly common and terminations are not unknown. Two issues that can cause a delay are obtaining financing and appraisals, and the sections below look at both.
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Why Mortgage Problems Cause Closing Delays
It’s hard to believe that mortgages account for so many delays and terminations. In the electronic era, lenders can do much traditional underwriting work in minutes. Lenders increasingly have the ability to electronically get verified bank account and tax information with the press of a button. In some cases, Fannie Mae and Freddie Mac don’t require an appraisal. Their automated systems may offer a waiver, and the lender decides whether to use it.
However, if you look at the mortgage origination process it’s clear where things can go very wrong. For instance, the borrower doesn’t deliver required paperwork to the lender. The lender can’t verify income, employment or asset claims. But the biggest problem is likely that a borrower qualifies one day but not the next.
Debt-to-Income
To get a mortgage borrowers must pass many tests. There is the income test: you must have enough. The employment test says you must be able to show how you earn your income and that your earnings will continue. But the one test which seems to stymie many borrowers is the debt-to-income (DTI) test.
Mortgage programs allow borrowers to spend a given percent of their gross monthly income on housing and on all debts including housing costs. For instance, FHA’s baseline ratios for a manually underwritten loan are 31 percent of gross monthly income for housing and 43 percent for all debts. With compensating factors a file can reach 37/47 or 40/50 (credit score of 580 or higher), and loans approved by FHA’s TOTAL Scorecard can be approved at higher ratios. Lenders may set lower limits, so 31/43 is a good working ratio.
If borrowers have a gross household income of $8,000 a month, then they can devote as much as $2,480 (31 percent) to the total mortgage payment. Under FHA guidelines, that payment covers principal, interest, property taxes and property insurance (PITI), plus FHA mortgage insurance and any HOA dues. Within the guidelines our borrowers can also spend $3,440 (43 percent) for all recurring monthly debts including the mortgage payment.
How New Debt Before Closing Can Stall a Loan
When lenders run the numbers early in the origination process they may find that the borrowers are within the debt-to-income guidelines and proceed with the mortgage. In the old days this was pretty much the end of the DTI process but now things are different. In the electronic era, lenders can check for new debt right up to closing. Run up a credit card balance before closing and the lender may find out.
Why is this important? Between the time they submit a mortgage application and closing, borrowers often add to their debts. Higher debts mean steeper monthly costs and for marginal borrowers that can result in debt-to-income ratios above the limits. Electronic monitoring systems kick in. Suddenly a loan application which was okay is now unacceptable.
Mortgage borrowers often open new credit accounts or add to credit balances between the time they apply for a loan and closing.
Borrowers need to protect their interests. One strategy is to simply borrow less to avoid bumping up against DTI ceilings. A second is to stop spending once they have submitted a loan application. Forget about adding debt to credit cards or buying appliances before closing. A car purchase is out of the question.
Closing Delays and Appraisals
You can see the likely “problem” with appraisals. The property doesn’t appraise. The lender will finance the home on the basis of the sale price or the appraised value, whichever is less. There may have been a situation where the buyer and seller agreed on a $400,000 sale price but the appraiser valued the property at $395,000. As a result either the buyer will need to come up with more cash, the seller will have to lower the price, or both. If those things don’t happen then the transaction is likely to fall through.
