buyer out: financing contingency vs down payment loss (loan, real estate, approved)

[suzanckd]

I signed a contract agreeing to put the bulk my pension as a down payment. With the large down payment, the mortgage company found a way to approve a no doc loan.

I did not realize that I would need my estranged husband's signature to get my pension. Now I can not get the down payment, which prevents me from qualifying for ANY loan. The mortgage broken will issue a denial letter stating the reason for denial to be the lack of down payment money.

My contract has a mortgage contingency that says the contract is null and void without a mortgage committment, but also says that if I do not have sufficient cash assets at the time of settlement, I will be in breach of contract and seller will be intitled to any remedies as provided by law.

Should I simply enforce my right to back out, since without the pension money, I do not qualify, or should I reapply for a full doc loan and get the morgage company to produce a denial letter saying denied due to lack of income to avoid the legal remedies due to lack of assets (down payment)

The sellers have been notified and are refusing to return the deposit and threatening to sue for specific performance.

Please help!! Thanks!!!

[UseJeff]

I would say talk to your agent, and it may be worth looking up a real estate attorney. Have the attorney review the contract. To me it sounds like you're released if you can not get a mortgage. If you can get a mortgage, yet you do not have sufficient cash assets at time of settlement (closing) then you will be in breach.

So, if it's worded like you say... it sounds like you would be released, then everything after that is moot.

There is a real estate forum on this board, chock full of real estate agents. Us mortgage guys know the finance side back and forth, but we don't often deal with the sales contracts... or at least how they are enforced.

[suzanckd]

Thanks for the good advice. I will repost on the real estate section. One other thought. In your experience, is a buyer obligated to a contract if they are approved for a mortgage but do not like the terms? If I don't accept this mortgage and ask for one with better terms and get turned down for that, am I then released from the contract?

Thanks again!

[UseJeff]

Basically if you signed a contract saying if you can be approved for a mortgage then yes you'd be liable for the contract. It's not noted within the contract if you "like" the payments or rate offered. However, you can put a rate contingency within the contract. In this day and age you could get away with it, but if I was selling my house to you I'd counter that in a heartbeat. Well unless you were the only offer I had received in 6 months time...

So, they could sue you to buy the house, or sue you for reparations in that situation. If you have a good Realtor they would warn you of this if you showed any sense of being shaky about buying the house. It's probably not commonplace to warn you for no reason, as they would expect you're offering 100's of thousands of dollars for something you actually want.

Anytime you get into something that deals with 100's of thousands of dollars, and a signed contract, you really want to invest money into a professional who can protect your interest. (real estate attorney)