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I am in a contract with a new home builder in CA where the home will be completed in April/May of 2009.
With the uncertainty with interest rates and home prices in the future, what would happen if these scenario materialized?
The loan amount is classified as Jumbo, non-conforming, due to new law in 2009 and the rate that I was qualified is no longer valid. The new payment will take me out of required percentage as I would like 30 year fix.
Secondly, with the above situation, the price of the home market has decreased 10%.
Would I be able to get out of the contract and get my deposit back?
Not sure I understand your 1st quesion. Why don't you list all of the details of your situation (sales price, down payment, credit scores, where in CA you are buying) and you'll be able to receive specific feedback.
Answer to your 2nd question would be to review the terms of your contract, if there is no appraisal and/or financing contingency then you would not be able to back out of the transaction & get your earnest money back simply because values fell. It's a risk that people take when you enter into a purchase contract, everything has a risk and it's important to fully evaluate things before entering into one.
This is pretty straightforward, isn't it? You entered into a CONTRACT and read the terms. If you agreed to what is in the fine print you moved forward and signed, if not you did not agree you should not have signed. The builder certainly qualified your ability to pay for the house, did they not? If your ability to pay changes you will forfeit your "deposit". It happens.
Not to be too harsh, but if you did not want a "new house" with the RISK that comes with maybe you should have bought an EXISTING house. Lord knows there is NO SHORTAGE of 'em nationwide...
Of course I have to think that this house that you have CONTRACTED to have built for you is going to meet our needs and you have to had put some earnest money toward it, otherwise the builder would be unlikely to go through the trouble/expense of building.
My advice is to do your best to NOT WORRY about things. The "train has left the station". As long as the terms of the contract are met by the builder you are going to be expected to met your side of the deal.
you can always walk, but you will lose your deposit. there is probably a paragraph in there that talks about a declining market.
you can also talk to the builder and see if they will cut you any deals. a lot of times they will offer association dues paid for a few years or something. if they do, i would ask for it as a check at closing, not subtracted from the sales price. and don't ask for a check until you have decided on a number with the builder/salesman. you may even be able to swing some upgrades too.
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