Is it legal for a bank to withdrawl thier approval for any reason?

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So I went through the pre-approval process and was approved. I gave them my most recent pay stub, they ran my credit, and I disclosed all debt. I was honest and answered everything truthfully. They said based on my debt-to-income ratio and credit score I was approved for 41k. (not a lot, but I also was getting an interest free defered loan from the local government ran housing authority by completing a class for first time homeowners) They gave me the pre-approval letter and I was on my way. In the time between the pre-approval I paid off 3 credit cards and $ 600 off my car loans. (thus lowering my debt-to-income ratio.) I did not incur more debt, did not apply for any, did not lose my job, was not late on any payments, did not lose income. (in fact, my latest paysub showed that I was making more than they used to determine the d2i ratio) So I found a house, put a little money down, got an inspector, and payed the ‘official approval fee’. They immediately denied me. I was shocked. I was set to close in two weeks, and they basically said they changed their minds. The loan officer told me that the underwriters said no because my d2i ratio was too high. When I pointed out I payed 3 cards off and $ 600 off on my cars (and made more than they thought) they came back with ‘your credit score is too low’. I asked my loan officer if they even ran my credit since the pre-approval and he said no. So they said yes at first, let me spend $ 750 and become legally obligated to purchase the house (i can be sued right?) and then took the exact same info they used for the pre-approval and said no. They &^$ %# me, my agent from the housing authority who put a ton of time and effort into this, and the sellers. The housing authority is now threatening to remove them from the list of banks they allow the program participants to use (the bank has been on the list for 10 years and has been getting loans since) The bank then told me i could use my second jobs as a source of income as long as there was no break in a second job. (I told them there was, but they said try anyway) But I got stopped on the last w2 because of Christmas and unreturned calls from the employer. I was supposed to close on the 28 of this month, but now because of this I will lose the house. (i will try to ask for an extension but the sellers wanted to close by the end of the year) The bank said I cant afford a $ 125 a month mortgage. (after my down payment the loan would have been for 25K) I rented my apartment out, and put my furniture in storage, and I have to be out by jan 1st. I don’t know what to do, If there is anything. I know I did everything right, I didn’t deserve this. If they never lied to me and just said no in the first place I wouldn’t be in this mess…..What do I do?????

3 Comments
  1. Reply
    delive_rance
    May 1, 2011 at 12:06 am

    If a bank should recall or withdrawn their approval for any reason they should properly inform the concern customer like yourself if they somehow made a mistake in approving something they never thought will occur in the future or found out something they think will jeopardize the role of the bank itself in this transaction.

    The other recourse now for you is to file a civil suit against the bank, and hope that your case will land a favorable respond from the judge. Because in this scenario your the one who is aggrieve and has little or no more time to reverse the catastrophe that the whimsical reason of the bank to withdraw your request. Here you are asking a civil damage from the withdrawn of your petition from the bank. That cause you anguish and emotional trauma upon learning that the bank withdrawn the pre-approved request you made and thereby cause you more money that you should have. I myself think you have a case.

  2. Reply
    sgoldperson
    May 1, 2011 at 12:43 am

    This is why you never spend money until the ink is dry. They have every legal right to say no. Pre-Approval is meaningless. All they do is see if you even come close to being able to be approved and if you do they say hey come on in.

  3. Reply
    Landlord
    May 1, 2011 at 12:56 am

    Correct, until you receive money and sign closing papers on the loan it can be withdrawn, it is not fully approved until they hand over the money.

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