Is a buyer obligated to accept a "bad" mortgage? (loan officer, interest rate)
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I have a mortgage contingency on my contract that says "the buyer shall apply for a loan in writing and use their best efforts to obtain it."
We have have been approved for a mortgage, but the terms available to us leave us with a monthly payment that we can't afford. (no doc, interest only, 8 1/5%)
If I say no to this loan, am I in breach of my contract?
If you are using an agent they should have specified contingent upon qualifying at an acceptable rate, whatever that rate may be.
If there is no rate noted in the contract and you could only get approved at 12% interest, contractually you are bound to proceed.
Best bet would be to talk to your agent or a lawyer.
Thanks Mike!
No rate specified, just amount, type (conventional), and terms (30 years)
We did not produce the written mortgage committment within allowed time and terms say contract would be void if that happens. Would that mean there is no longer a contract?
But you didn't get a "conventional" mortgage- you got an interest-only loan. If you can't qualify for the conventional loan, and it's spec'd in your contract, you should have an out.
But you didn't get a "conventional" mortgage- you got an interest-only loan. If you can't qualify for the conventional loan, and it's spec'd in your contract, you should have an out.
Bob
Interesting . . . our contracts give us a choice between Conventional, FHA, VA, Owner Carryback, and Assumption. As long as it's a new mortgage through a lender then it would be considered "conventional" financing here, whether that financing be in the form of a 30 yr, 15 yr, 40 yr, ARM, interest-only, full doc, no doc, stated income (which I doubt you can get anymore), etc. We also have a Loan Status Report which must accompany our contract that outlines the maximum interest rate and the LTV.
This is interesting to see how the contracts vary from state to state. What is considered a "conventional" loan in your "neck of the woods"?
I'd agree you should speak with an attorney. I always recommend local attorneys who do little other than real estate, who don't charge for phone calls, and who very seldom charge unless there's a closing, btw...In my area of my state, this is not unusual.
The contingency states that you're released from the contract unless you produce a mortgage approval? Really?
And I'd underline Bob Kovaks sensible observation - the mortgage you've been approved for isn't a conventional mortgage.
But you didn't get a "conventional" mortgage- you got an interest-only loan. If you can't qualify for the conventional loan, and it's spec'd in your contract, you should have an out.
Bob
Actually a conventional loan is one in which the interest rate does not change, it can be an interest only. If it was an adjustable rate interest only then it would not be conventional.
Edit: There can be many interpretations of what constitutes a conventional mortgage. Just being interest only may not be enough for it to be considered unconventional.
One thing to note about a "no doc" loan.... you can always easily sabotage your loan by calling the lender direct and telling an underwriter what you make, and that you can't afford the payment.
In addition, you can tell your loan officer you can not afford the payment. At that point, you put them into the situation of predatory lending. They may want a paycheck, and ignore your comment...so at that point you could send a certified letter to the broker asking them if it's legal to put you into a loan of which they have been notified you can not afford the payment. If you do that I'd expect a denial letter to be faxed within 24 hours. They won't jeopardize their license over one loan.
So, you essentially quash your loan and kill the contract. Regardless of all that, it's definitely not in your best interest to take a loan you can't afford. Your loan docs actually state that if you sign, you are saying you can repay the loan. So in a sense you're actually making an illegal statement...so no reason to feel bad about using the tactics to get out of the loan.
many state laws DO NOT PROTECT SOMEONE because the INTEREST WAS TOO HIGH. a lot of realtors have this box that says the rate will not be higher than 6%..................if you get a rate of 6.125% you are still OBLIGATED to the contract.
a lot of realtors use this contingency but the ONLY contingency that can be used is if you couldnt obtain financing.
you need to make sure that you have to first application date (in case the seller asks for it), and send in your paystubs, assets info to the underwriter.
DO NOT TELL THE LOAN OFFICER that you want OUT OF THIS HOUSE.
Make sure that you mention I CANT AFFORD THIS PAYMENT.
send them the proof...follow up with them in 1-2 days for a DENIAL LETTER.
send the denial letter to the seller to retrieve any earnest money back
Quote:
Originally Posted by suzanckd
I have a mortgage contingency on my contract that says "the buyer shall apply for a loan in writing and use their best efforts to obtain it."
We have have been approved for a mortgage, but the terms available to us leave us with a monthly payment that we can't afford. (no doc, interest only, 8 1/5%)
If I say no to this loan, am I in breach of my contract?
Thanks for the help!!
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