The top reasons an escrow will fail are related to 3 things: Loan, Inspection and Appraisal.
To hedge your bets in this current marketplace that this doesn't happen to you - Get fully preapproved with a direct lender. I don't mean to ruffle feathers with our Mortgage Brokers - but their word alone just does not cut it these days. If you want to use a mortgage broker, make sure they submit your file and all documentation for review to a direct lender, and your approval comes from them. When I say approval, what I mean is that you have submitted tax returns, pay stubs, credit report and verifications of your employment and income have been done - all that remains is the appraisal and approval of the property you choose to buy. Late in escrow is the most expensive time of all to find out that you didn't qualify for the home you went into escrow on. Also make sure your agent protects your loan and appraisal contingencies. You do not want your earnest money deposit at risk here.
Secondly, make sure you are 100% truthful and forthcoming about your financial situation to your lender. Lending rules are tightening daily. They WILL find out the truth, and it may cost you the home after you have spend $100's on appraisals, inspections, etc. Not a good plan. Avoid job changes, AVOID NEW EXPENSES - do not charge anything new...do NOT buy a new car....Do not pay off debts unless your lender tells you that it would be a positive thing. Closing accounts can have a negative effect on your FICO.
Next, be pro-active about inspections, get them early and understand what you are buying. The few hundred dollars spent to insure you're not getting a lemon is an investment not an expense.
Finally, before you make an offer, have your agent run a full market analysis to determine the liklihood of appraisal problems. With the inventory so low, the temptation is to bid up the price. The problem is, with the current HVCC (Home Valuation Code of Conduct) and new appraisal guidelines, an astonishing number of houses are not appraising. You will lose your appraisal fee, and escrow will fail. Do this a few times, and you are eating away your down payment.
Inventory is scarce right now - please be prepared to make several offers and be persistent. We are seeing multiple offers on nearly everything. Select an agent who is willing to hang in there with you - and try to keep your spirits up. Very few people are getting their first choice home right off the bat...it's just not the way it is in this market.
Best of luck!
Jeri Creson, Broker
TotalAccess Realty Advisors