I had no mortgage contingency included in the purchase, the loan is denied, what happens now?

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My husband and I are first time buyers, and we found a house we love. We were ready pre-approved, and confirmed that there would be no funding problems. We signed a purchase and sale, and then to inspections and evaluations. There were a few things in control, but these vendors have agreed to improve the assessment and came back fine. Our loan specialists, announced today that the VA will not fund our loan due to some of the collections of six years. Then, when searching what to do now, I think there is something called a “mortgage contingency”, which is generally intended to protect the buyer if they can not obtain financing. Well, it was not included in our contract. Obviously I know nothing of this sort of thing, and it seems that the realtor should have informed me the opportunity to have an event included in our mortgage contract. Real estate brokers are required to inform buyers about this? In addition, the seller can sue me if I can not get funding? Pre-approval/qualification We went through the whole process, reports credit, income, finances … All the lender has been published, and he said we were approved without any problems. He said that lenders do not worry about something old, as we ‘got a good credit history since.

  1. Reply
    January 25, 2011 at 6:01 am

    You need an attorney.

    You will be sued for failure to perform.

    You signed the contract, you owe them the money, without the contingency you can NOT use this as an excuse to screw them over.

    You will owe them any money they have spend, and any loss of value while they wait for a new buyer.

    And yes, you need to kiss that agent of your good-bye, they should not have allowed this to happen, they completely fu@@ed this up.

    You might want to turn around and sue them for failing to represent you properly.

  2. Reply
    Dan B
    January 25, 2011 at 6:05 am

    Did you hire your own real estate agent? or use the seller’s. You should have your own agent. Your own agent would or should have caught this before you committed. The seller’s agent has a vested interest in the SELLER. Your own agent has a vested interest in YOU as a buyer.

    Who did the pre-qualification for the loan? Pre-approval I don’t think is the same as a pre-qualification. I get pre-approvals all the time in the mail for credit cards and other loans. When you get pre-qualified, a credit check is run and these issues come up. They don’t come up on a pre-approval.

    With a pre-qualification, there’s no need for a contingency clause because you already know you’ll get the loan.

    The worse that can happen is you lose your escrow money – the money you pay to take the house off the market while all the financing and paperwork is completed.

  3. Reply
    Alpha Beta
    January 25, 2011 at 6:41 am

    First, pre-approved is not the same is pre-qualified.

    I’m not aware of any purchase agreement written by a Realtor that does not include a contingency clause. Obviously, if you can’t get financing, you can’t buy the property.

    Try a credit union … vs. a bank or mortgage company.

  4. Reply
    Mr Placid
    January 25, 2011 at 7:21 am

    You’ll need to read your contract.

    You contracted to purchase the place by a certain date. If you cannot complete your performance by that date (that is, come up with the money) then you are in breach of contract. You will potentially be liable for breach of contract damages. NORMALLY the damages are specified as “liquidated damages” in those boilerplate contract forms real estate agents are required to use. Look at your contract.

    Also, loan specialist only said that the VA doesn’t want to be involved. What about options other than VA? Have you asked your loan specialist about other funding possibilities?

  5. Reply
    January 25, 2011 at 8:00 am

    Hi Chris,

    It’s possible that what you’re dealing with right now is a lender overlay and not part of the VA guidelines.

    Here is how it works. The VA administration has set underwriting guidelines that ALL lenders must follow in order to close, fund and have the VA guaranty (insure) these loans. Lenders are free to add their own guidelines on top of the VA guidelines. Here is the best example I can give you. FHA and VA guidelines do not have a minimum credit score requirement but pretty much every lender around now requires at least a 620 and in some cases 640.

    What all this means is you may be able to save your contract and home by applying with another lender and asking to have your contract extended.

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