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my wife and i signed a purchase agreement back in mid november. at the time the sales counselor told us interest rates were right at 4% and even gave us an estimate of our monthly payment including esrow and hoa fees. i talked to the mortgage company (builder is lender) a few days ago and the lady is telling us rates are close to 5.5% and we can't lock in until ground is broke in about another month. how high will rates be then?!?!. 1.5% is more than $500 dollars added to our monthly mortgage. she also said they can only lock for 180 days and can not guarantee the house will be finished in 6 months. at 4% we were right around the max and at these higher rates we would be house poor. so we are going to back out of the deal. we have actually found another house at a better price range which is already built.
i know you usually don't get earnest money back but on the front page of the sales agreement it has some deadlines and one states we must pick all our non structural options within 10 days of signing the sales agreement. well the builder sent us an email 9 days after signing which said the earliest we could come in and choose our options would be 25 days after signing the agreement. all this time rates are rising. is this grounds to get our earnest money back or are we just going to take the loss?
You probably want this in the real estate forum and not the mortgage forum. But I would say you probably want to consult a real estate attorney on this one.
Can you qualify for the mortgage if it goes up any further than just 1.5%.
You need to decide if you want out of the contract if you cannot control the terms. If you do, then you need to consult an attorney to see if you have any grounds to get out. This early on, you probably can, but that's my opinion.
The longer you let this go w/out making a decision, the more expensive it gets. Don't keep moving your deadline to deal with it ......"after Christmas we'll decide" on to "after the first of the year" to "when it stops snowing."
I have a long-time customer with more money than sense that walked away from $100K in escrow with Toll Brothers because he changed his mind when the home was close to being completed. Looking back, he probably made the right decision to walk away.......the right decision would have been to walk away sooner.
Some builders have shady practices, but if the contract was reviewed by a knowledgeable buyer's agent...
...they certainly would have insisted that if could not afford to pay the note on the house the deal could not go forward. That is the #1 "out" in my neck of the woods. You'd get your money back.
Please tell me you have a buyer's agent...
Some builders use the money from walk away buyers to finance their sales office bonuses; if you are dealing one-on-one with some operation like that you are in bad shape. If the deposit was large it might make sense to get an attorney. If the amount is small relative to $200+ hr lawyer billings I think you've learned why getting an experienced buyer's agent well before you sign ANYTHING is a wise move!
some contracts have provision that deal is void if you can't find mortgage at x% rate. Also rates are going down again, so good rate today for 30 year mortgage is 4.75%
Yeah, our contracts say the terms of your financing, including a max interest rate. If you can't get a loan with those terms, that is a legal out, and you would get your money back. You need to see if your contract has similar terms or not.
Are you working with an agent/attorney? They would be the ones to ask this type of question to, and also the ones who would make sure you are protected in the first place.
4.75% may be the rate today, but it certainly isn't the rate for a home being delivered in 120 - 180 days.
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Some builders have shady practices, but if the contract was reviewed by a knowledgeable buyer's agent...
