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I obtained pre-approval from a lender and before I started shopping, I asked him to estimate what my closing costs would be. I knew I would be getting some grant money but I also knew I'd still need seller help for closing costs. If I could get an estimate of the costs based on my pre-approval amount, then I would know what to ask the seller for. The lender sent me an estimate and from that I determined what to ask the seller for. I found a place, we signed a contract, the seller agreed to the amount for closing costs, inspection went well, everything looked great. Today I got another estimate for closing costs and it's $6,000 more than the estimate I got with my pre-approval. I don't have the additional funds and have no way of getting them. I had a mortgage contingency in the contract for 21 days and that has passed. In any case, I don't know if my not coming up with the closing costs fits under the mortgage contingency because at this point my mortgage has not been denied (although it hasn't gone all the way through the underwriting process). I've asked my realtor to go back to the listing agent and see if the seller will make up the difference on the closing costs. He was reluctant to do so and said he would first talk to the lender to see what the deal was. If the figures are correct and I will be short funds, he will talk to the listing agent. But my realtor is insisting that if I cannot come up with the funds, then I forfeit my deposit and must also pay $400 for the appraisal. Somehow this doesn't seem right. While I have empathy for the seller, had I known the closing costs would be so high, I would have asked for more help in the contract (which the seller could have turned down) or I would have looked for a less expensive home which would have resulting in less for closing.
Anyone know whether I have grounds to get my deposit back? Will my mortgage be denied if I am unable to prove I have enough assets for closing and if so, would that be sufficient to satisfy the mortgage contingency?
Last edited by antiques55; 08-04-2010 at 10:19 PM..
Have you spoke to your lender? Was this amount on the good faith estimate? On my GFE closing costs show much more then what would be covered by seller concessions (we got 4%). The lender said not to worry as it included sellers closing costs as well. Make sure to talk to your lender before you make your next step.
What I received from the LO before I had a contract on the house was an "initial fees worksheet." The total estimated settlement charges on that were $10,379.85 and it was based on my approval of $175k. What I received today, on a contract for $175k, is a GFE and the total estimated settlement charges are $16,181.20, so almost $6,000 more. I simply don't have an additional $6k and no way of getting it. I got this information late in the day. I tried calling the LO (the GFE came from his assistant) but only got VM. My realtor is going to try to call him and I'll try him tomorrow.
What I received from the LO before I had a contract on the house was an "initial fees worksheet." The total estimated settlement charges on that were $10,379.85 and it was based on my approval of $175k. What I received today, on a contract for $175k, is a GFE and the total estimated settlement charges are $16,181.20, so almost $6,000 more. I simply don't have an additional $6k and no way of getting it. I got this information late in the day. I tried calling the LO (the GFE came from his assistant) but only got VM. My realtor is going to try to call him and I'll try him tomorrow.
The lender should have given you a new GFE once the contract had been sent to them and an interest rate locked-in. In addition, your Realtor should have estimated those numbers for you.
I'm scratching my head trying to figure out why the time period on your financing contingency wasn't negotiated out longer beyond the 21 days if you didn't have all the numbers from the bank before that initial time period expired.
It would be good if the Seller is willing to work with you but what happened to you is in no way the Seller's responsibility. Yes, you will owe the money for the appraisal if it has already been completed. As to the earnest money deposit, read your contract in the section that spells out what happens in the event the Buyer is unable to close. I suspect your Realtor has read your contract and is correct but you should verify.
Call the lender and find out what is going on and why the disparity between the two estimates.
Find out from the lender if the appraisal has been completed and if it has not, put a hold on it or cancel it so you are not stuck with the charges if you are unable to close.
You mention you have no way of getting the extra down payment money. Speak with the lender about this and see if they have any ideas/solutions. Have you an IRA you can tap into and re-imburse? Is this a conventional loan or FHA?
The appraisal was just completed so there's no stopping that at this point. Believe me, if there were any money such as an IRA or 401k that I could tap into, I'd consider it. There is not. This is an FHA.
I have cross checked the number between the worksheet and the GFE and most of the the discrepancies have to do with taxes, although there are a few other items. I also am unable to get the numbers on the GFE to add up. So hopefully the assistant made errors and that's where the problem is. Because based on the worksheet, I have enough for closing.
I'll talk to the lender tomorrow and see what's up. I guess worst case, I end up losing the earnest money, inspection fees and have to pay for the appraisal. I'll just have to suck it up and move on.
Lots of contracts I've seen have an "out" provision, conditional on you getting a loan at X% with $X down. If they are changing your loan around on you, then it's not your fault and they may have to return your deposit.
Why in the world would your closing costs be $16k on a $175k house? That's a ridiculous number! Your closing costs shouldn't be more than about $5-6k. Something is wrong, unless your credit is bad and he's having to buy your rate with points.
The scenario you have just described was me 2 months ago. I received an adjustment of closing costs and fees that was more than my initial one and I phoned my lender in a panicked state. She sat down and explained what the fees were for and it wasn't as bad as I thought. When we actually went to closing the costs were even less which was a bonus.
And as a seller unless I was in some absolutely desperate situation there is no way I would cover the difference.
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