The mortgage company requires repairs to the home. Mortgage companies are investing in the purchase of the home as much as they are investing in the buyers. If the buyer does not pay the mortgage, the lender winds up with the home, and it wants to be protected. If the appraiser points out any issues the mortgage company considers significant, the mortgage company may require them to be repaired in order to close.
In this situation, the repair should be done at the buyer’s expense, since the buyer was buying the property with the defect. In some cases, however, in order to actually close the home, the seller may have to contribute something toward the repair. Mortgage company repairs are generally only requested if the home has significant defects or issues.
The mortgage company pulls a bait and switch on the mortgage type putting a hardship on the buyer. At settlement, the buyer looks over the mortgage documentation and discovers that there is now a prepayment penalty, meaning that if he or she sells the home in the next several years, the bank will charge a large fee for paying off the loan early.
Worse, the loan fees are $2,000 higher than the expected fees. At times, lenders believe they are helping a buyer by switching to a different loan program when the first one falls through, but buyers are surprised by the changes in rate, terms, or closing costs.
There are also mortgage companies known as predatory lenders. These lenders have been known to make last minute changes to the mortgage terms in order to increase their income. A panicking buyer may walk away from the table and refuse to settle on your home.
There is no easy way to predict whether or not there will be a problem, but if you verify that your buyer is using a reputable lender and has a full loan commitment in plenty of time for settlement, the odds of a problem decrease greatly.