Lender's may not require home inspections, but they do expect the borrower to complete the due dilligence prior to closing. In my case, I was quite thorough in my inspections (did infra-red and radon testing ) and came up with a safety problem - radon levels were 4 times the EPA limit. As part of the negotiations with the sellers, I had to confirm with the lender on our payment strategy. The sellers didn't have a lot of cash in the bank, and simply wanted to hand over a check at closing to pay for fixing the problem after I took ownership.
The problem here for lender is that once I have that cash in hand, how are they sure that I used it to actually pay for the installtion of a mitigation system? And, because this repair corrects a safety problem that would preclude them from selling the house should I default, they wanted the installation done before closing.
So, while the inspection is for you, anything that gets written into the contract does get reviewed by the lender and underwriter. Thus, anything that becomes a safety issue or a protential significant problem for resale will most likely need to be addressed before closing can occur.
In your case, ancient windows could fall under the both scenarios. First, for windows that do not work (I assume you mean they're painted shut or won't slide open), I venture that could be construed as a safety issue as windows are meant to be egress points in the event of a fire. Also, it'd be hard to find a buyer in this market willing to accept 80 year-old windows. Not impossible, but difficult.
Now, if the lender or underwriter never hears word about the windows, then I guess it won't be a problem - except for you. I used to live in a house with 100 year-old original windows; incredibly energy inefficient. Like living in a home made out of swiss cheese. If I were you, I'd try to get the owner to either 1) replace the windows before closing, 2) put money in an escrow account to pay for window replacement (he/she can use cash from the sale to set up the account) or 3) knock down the selling price to compensate you for window replacement (overall, the loan is smaller, but you'd have to have the cash in hand to do the windows yourself).
