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Old 03-17-2013, 09:00 PM
1 posts, read 2,300 times
Reputation: 10


Hi, I live in MA and am in the process of buying a house. I have a condo that is currently underwater on a mortgage (bad timing), so have saved up enough to put down a 10% down payment on a new house, while paying down my condo to refinance and rent.

We made an offer on a new house, submitted a mortgage application, and signed a P&S based on putting 10% down (FHA backed) at a specific interest rate. We had a mortgage contingency deadline to get us out of the contract if we were unable to get financing at the 10% down.

3-weeks after submitted the application, we were told that because we already had an FHA backed loan on our condo, we were "ineligible" for a second FHA backed mortgage. He went on to tell us that we COULD get a 20% down loan, with a much higher interest rate.

We weren't in a position to put 20% down, so asked him for the denial letter for the original mortgage so that we could execute the mortgage contingency clause. After several days of trying to get us to take the 20% down mortgage (and lots of pleading calls from him and our buyer broker), we again asked for the denial letter. We received something saying we had been denied a 20% down mortgage for which we had never applied - it would never have worked to get us out of our P&S. It turns out that because we were ineligible for the original mortgage (which only resulted in a computer feedback and not a denial by an underwriter) we could not get a denial letter and were out of time to hunt for a mortgage we could afford - we were backed into a corner and were in grave danger of losing our $30k we put down!!

Ultimately, the deal's attorney pleaded with the seller for a 10-day extension, so that we could secure financing that is still not really affordable for us. To me, it appears that this was a bait and switch on the part of the mortgage broker, covered up for by the buyer broker and attorney - who are still patting themselves on the back for getting us an extension for something we cannot afford in the first place. We asked the attorney at least twice to execute the mortgage contingency clause, but since we had no real denial letter, he couldn't (although he still has yet to admit to that - instead he says he knew we really wanted the house...) HUH?? What gives with this?
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Old 03-17-2013, 10:10 PM
3,317 posts, read 7,253,255 times
Reputation: 4095
Your mortgage guy is wrong.

You can, indeed, have another FHA mortgage. Typically, it's fine in cases of relocation, increase in family size, buying a bigger place (you generally have to be buying a larger, "better" dwelling), and making sure that the new home will be your primary residence.

Not sure where the snag might be on this one. Did the lender give you any details?
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Old 03-18-2013, 09:13 PM
6,359 posts, read 7,324,210 times
Reputation: 10807
Why would you put $30,000 down? Don't you have your own attorney?

If not, get one ASAP to work on your mortgage contingency.
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Old 03-20-2013, 02:40 PM
Location: Funkotron, MA
1,204 posts, read 2,904,183 times
Reputation: 1793
Do you have your own attorney or are you dealing with the seller's? If not, find one ASAP. The seller isn't going to want you to back out or give you your money back.

Does your contingency say you need to provide a denial letter, or just that the contract may be cancelled if you fail to qualify for the mortgage after applying due diligence?
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