possible to get earnest money back from new build? (Howe: sales, HOA)

[Gorfml]

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?

[TurtleCreek80]

It's doubtful you'll get the earnest money back. That's usually the seller's "perk" if the buyer backs out.

Good for you for walking on the house though instead of forging ahead with the "house poor" lifestyle!

[nsumner]

It sounds like you have grounds for terminating and getting your earnest money back. However, read your contract. Many builders will say that in case of termination, you get all your earnest money except $500.

Keep in mind that the longer the lock the more money it will cost you so that is probably why they quoted you a higher interest rate. Have they explained that to you? Stick to your guns or get your Realtor to battle it out for you. The sales person had no business giving you an estimate without having an application and knowing what your credit and debt ratio is. I see that too often where they "omit" fees to you to sign a contract on the spot.

If you like the house, you can still negotiate with them where they can buy down the rate for you if the house isn't finished on time so you can get a 4% rate. Today's rate at right around 5% for a 30 year fixed and they are creeping up.

Naima