Crazy Mortgage Madness???

I'm confused...isn't it the sellers decision to accept an offer for $25,000 less?

Why didn't the seller hold out longer for the price they wanted?

I don't think the seller has a case against you.

When we were buying a home, our purchase offer included contingencies for financing approval and inspection results. Those contingencies protected us financially in the case that something fell through with the bank, or if the inspectors discovered issues with the house.

If your offer to purchase was contingent upon financing then the seller does not have a case against you. If your offer to purchase did not have contingencies, then the seller may have a case for financial damages.

You said you had a pre-qualification letter from the bank. If that is accurate, you need to know that a pre-qual letter is not a guarantee that you will get a loan. It's a quick 'maybe' answer. It mostly signifies that you're working with that bank, it is not a promise.

What you needed was a pre-approval, which means all the paperwork is done/submitted. You can do this before you put an offer on a house, but it sounds like you did this in tandem with your offer, which is also common, but is why contingencies exist.

After you have that, final approval depends only on whether or not the property itself holds up to appraisal.

Here is a good article that talks about the steps in the process:
http://www.investopedia.com/articles/basics/07/prequalifi...

I hope everything works out well for you.

It sounds like you were unaware of "pre-qualified" and "pre-approved". There is a difference with both and strict contingencies with both. Your misunderstanding does not constitute a justifiable reason for you to sue the mortgage company. Don't waste your money on attempting to pursue it.

You have a previous foreclosure on your record. That is a huge black mark on the record for many years, no matter how well you've come through it to get where you are now. I don't know of any mortgage company that would lend money to anyone with a previous foreclosure. Mortgage companies have really tightened up on the rules in the past few years and they don't give much slack.

Anyone can sue anyone for any reason. I don't think the seller has a case against you. Their representative should have vetted you better. However, I am not a lawyer so I would ask my lawyer.

Sounds like after the mortgage company looked closer at your financials, they weren't comfortable lending you the money. Pre-qualify and Pre-approval are two different things.

Did you have a contingency in place? Most do. We did when we built last year. The long and short, not sure the seller has a case. Normally, they keep the earnest money and then each go their separate ways. You are not responsible for them accepting a lower price. That was their decision. As for you suing the lender, yeah, not sure you have a case either. It sounds like after they did a closer look at your financials, they didn't like what they saw and declined. That is their right since its their money.

The sellers have no case against you, in my opinion. They accepted the offer from the other buyer. They were not forced to sell it for $25K less. They chose too. They can't blame you for that. If a lawyer takes that and a judge hears it? I would be pissed.

You need to read your contract, pre-qualified does NOT mean pre-approved. The commitment letter is just that, a commitment but I'm SURE it had contingency options in it. Did you read it thoroughly before you signed it? Or were you too excited about your "dream" home? Sorry to be blunt, but really, that's the problem. People don't read contracts before they sign them.

Since I've not read your contract? I can't speculate if you have a case against the mortgage lender. You'd have to consult an attorney for that one. Schedule a consultation, bring all of your paperwork, signed contract and figure it out.

I say this wasn't supposed to be your home. Things have a way of working out.

Prequalified l does not mean approved. There's a difference.

A commitment letter does NOT mean approved. You need to find out what pre-requisitions needed to be met in order to "pass" and get the loan.

You need to read your contract over again. Take it to a real estate attorney and have him/her review and tell you if you have a case against the mortgage company and if the sellers have a case against you.

Pre-qualification does not guarantee you will get a mortgage. It means that on first inspection you look to qualify, but they may decide after receiving all your paperwork (account statements, etc.) that you are too much of a risk. Did you try to get a mortgage from another company?

You obviously didn't clear the underwriting process which is something totally different from getting pre-qualified. I'm sorry you are experiencing this. Home buying is very frustrating. We lost two houses to other buyers in the last 6 months --one of which was my dream home. But things happen for a reason, so instead of suing the mortgage company, if I was you I'd be trying to figure out how to clear the underwriting process. Since losing our dream house, we have decided to go a totally different direction and explore a totally different dream. I'm super excited about this opportunity but it wouldn't have happened if we didn't lose what I thought was my dream house.

I don't see where the seller has any right to sue you for this sale falling through. Several of my kids have bought houses recently and there is always a clause that says if they can't get financing the deal is off.

I am not surprised you were unable to get the loan with a foreclosure, but I also don't think the sellers can sue you for not buying their home without financing. I also am pretty sure you will not be able to sue the lender for choosing not to lend you money. I would talk to a lawyer.

Did you have contingencies in place for this? If so, then I am not sure they have grounds to sue you. If not, then you may be out the money depending of the judgement.

The bank (mortgage company as you say) is not required to loan you money. You made an offer and could have used many different banking institutions to close the deal, not the first place that gave you a pre-qualification letter.

Did the 'mortgage company' just say no? or did they put your potential loan in a higher interest rate?

edit: I do think it is interesting that it took so long for them to get another offer and that it was less money than your offer. It sounds like the place was over priced and not in high demand. This is not your fault. I don't have all the fact and can not actually tell you if they can collect money from you.

edit: I know of several people who have been rejected, one who made an offer on my old home as his second home. The bank wanted more money down (at first the buyer was going to put a small % and the bank wanted 30% for the second property) and then he couldn't get the loan after all. He had good credit and made a nice income (yet i believe he was spread too thin in the bank's eyes). The second home part could be more difficult to get a loan. From the bank's perspective the buyer is more likely to give up on the second home than a primary residence if money became an issue.

There's many a slip 'twixt the cup and the lip.
Right up until closing - anything can go wrong - some things are fixable and some aren't.
If your deal fell through, then I can see you being out any down payment, but the seller could still sell the house to his next buyer.
There's no reason he couldn't wait till he got the price he wanted (unless he was asking high to begin with).
There's usually IS a contingent clause that covers this sort of thing - get a lawyer to go over your fine print.
Sure you were up front with the prior foreclosure - but did you really think that wouldn't have any bearing on your next loan application?
That's got to be a HUGE risk to any lender - and they don't want you to default on them.
You have a proven track record of doing it before.
Anyone can sue for anything - that doesn't mean they can win.
If you couldn't get the loan - that's sort of like trying to get blood from a turnip - they can't get money from you that you don't have.
Sorry but a 'commitment letter' is not a loan approval - please learn the difference.
It's very possible you will have similar loan difficulties in the future - so see what you have to do to repair your credit.

http://www.nolo.com/legal-encyclopedia/when-can-i-get-mor...

I think that Jill is giving you sound advice. There is a big difference between a pre-qualification letter and a pre-approval. You seemed to consider them to be one and the same. Your lawyer should know this. (Is this a real estate lawyer?) I don't believe you will prevail against the mortgage company.

I hope that you had a clause in your contract that stated that you got your down-payment back if your financing fell through. If not, you don't have a leg to stand on and the seller will get to keep that money.

Julie G also is giving you good advice about needing to clear the underwriting process. I'm surprised that you didn't think about this with a foreclosure. Surely you knew that it is hard to get a mortgage after foreclosing? I realize that you "read the tea leaves wrong" with this, but now you have reality at your heels, and you have to come at this with a different understanding, which MAY include not being in the position to purchase a home in the foreseeable future, especially at a low interest rate.

I know that buying an existing home is different than new construction, but I will tell you that I had a family member who put down $7000 as a down-payment without understanding the fine print. The fine print basically said that if a bank turned him down for a loan, the construction company would finance the loan for him. Back then, interest rates were around 5%. The financing that the construction company would do was 12.5%. Yes - 12.5%. And the catch was that if you chose NOT to use their financing, (12.5%), then they get to keep the down-payment. Because he didn't understand this, he lost the $7000 because he could NOT afford a mortgage payment at that rate of interest.

I'm sorry you are going through this, and it's obvious that this is a very expensive mistake on your part. Make sure you learn from it, rather than just feeling as if it's not fair. It is not the mortgage company's job to teach you about the mortgage process. It's your job to learn, ask the right questions, and have legal advice that you are paying for (a lawyer that represents YOU) early on in the process, especially when you have something as devastating as a foreclosure in your credit past.

Good luck.