Why the Bank Killed Your Deal (and How to Keep It Alive Next Time)

You found a deal. You ran the numbers. The broker said the seller was motivated.

Then, boom. The lender backs out. The deal dies. Months of work, gone overnight.

Sound familiar?

It happens all the time. And 90% of the time, it’s not because the deal was bad. It’s because someone missed something.

In this post, I’ll walk you through the real reasons lenders kill deals, and what to do about it.

Why Deals Die: What Many Investors Don’t Know

Lenders have one job: Protect their downside.

That means they’re constantly looking for reasons to say no. Here are the most common ones I’ve seen (after reviewing thousands of deals):

1. Debt Service Coverage Ratio (DSCR) too low

Your NOI doesn’t cover the proposed loan payments with enough cushion. Most lenders want a DSCR of 1.20 or higher, some require more.

2. Rates moved, and no one reran the numbers

I’ve seen deals die days before closing because rates jumped and the DSCR dropped. Always re-run your numbers right before locking.

3. Undisclosed credit issues

Old bankruptcies, tax liens, that 20-year old DUI from college, lawsuits (even if settled), can spook lenders. Know what’s on your credit and background reports before you apply. Disclose ALL bankruptcies, regardless of age, in advance. Have a letter of explanation for other issues, including remedy and/or transformation, ready and waiting in case it’s requested. 

4. Weak borrower narrative

If the lender doesn’t believe you can execute the business plan, they’ll pass. Package your experience + plan clearly and convincingly.

5. Shaky or missing financials

Messy rent rolls, missing T-12s, or handwritten expense summaries? Lenders won’t waste time sorting that out. Clean, organized docs build trust, and speed up underwriting.

A Real Story: When We Saved the Deal

I once worked on a multifamily refinance where the borrower submitted outdated numbers. Rates jumped mid-process, dropping DSCR to 1.17, below the lender’s 1.20 requirement. The lender issued a denial. Deal dead.

We caught it in time. I worked with the borrower to restructure the CapEx budget, reduce loan amount slightly, and bring in a slightly larger down payment. The lender reconsidered, and the deal closed. The moral of the story? Small details kill deals. But knowing how to respond can save them.

What You Can Do Differently

If you’re serious about avoiding preventable deal deaths, here’s your checklist:

• Run DSCR and breakeven analysis regularly
• Stress-test rates, expenses, and vacancy
• Organize your deal docs like a pro
• Craft a compelling story for your lender
• Ask the lender what they’re really worried about

Most investors don’t do this. And most investors wonder why they keep getting denied.

Need Help? I’ve Got You.

If you want help packaging your next deal for funding, or understanding why your deal didn’t make it, my coaching program might be exactly what you need.

Learn more about coaching & courses here.

Or if you just want to learn how to underwrite deals faster and more confidently, grab the free Multifamily Pro Forma Spreadsheet below.

Download the Pro Forma Template

Trevor Calton is the founder of Real Estate Finance Academy. Since 1997, he has analyzed, acquired, or sold more than $5 billion of commercial real estate assets, financed over 500 commercial investment properties, and overseen the asset management of over 6000 units of multifamily housing. He has been coaching and teaching real estate courses to investors and professionals since 2005, helping people at all levels develop a successful real estate investment strategy.