Profile picture for user36490413

We placed an earnest deposit of $1000 to purchase a house in Massachusetts.

The contingencies were mortgage and inspection.  The day after our offer was accepted, our mortgage company said they could no longer approve the original loan amount we were approved for.  We notified buyer and seller broker that same day and we were told we would lose the deposit.  Is this correct?
  • August 04 2013 - Boston
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Answers (12)

You could be protected by a financing contingency in your purchase and sales agreement. You can try and salvage the deal by obtaining financing from another lender. Your real estate agent should be able to assist you with this process. Good Luck!
  • January 02 2014
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Profile picture for RafaelAPRG
You should check what type of contingencies you and your agent stipulated in the offer. If you stated a mortgage contingency you should be fine. You can always feel free to call or email me and I can discuss this further with you in more detail.
  • October 27 2013
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The only way the seller can keep your deposit would be if your agent hadn't filled out a contingency addendum and checked off the mortgage contingency section. 
  • October 13 2013
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Profile picture for Brad Pratt
"The day after our offer was accepted"  This is the key part.  You must have an inspection contingency and a mortgage contingency in your offer.  If your mortgage lender tells you you no longer qualify then you back out based upon the mortgage contingency clause.  Have your buyers agent print out a deposit release form from trueforms, sign it and send it to the sellers agent.  If they refuse to give back the deposit then you will need to go through your attorney possibly putting a lien on their property preventing them from selling without settling with you.
  • October 11 2013
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You should have a protection period written into your third party financing addendum!! Also not all mortgage lenders are created equal!! try a different lender before you give up..
  • October 11 2013
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Profile picture for Jamesreboston
Great question. Typically banks won't start processing your application until you have a signed Purchase and Sales agreement. With that said you may only be under contract from an accepted offer. Your buyers agent should point out on the contingency page your mortgage commitment. It's standard practice in good faith to return deposits if you gave an earnest effort in applying for your mortgage. If you have additional questions have your attorney review the paperwork. Good luck!
  • October 11 2013
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Since we do not see the language of the offer you really should speak with whomever is assisting you in the transaction (buyer's agent and/or buyer's attorney). If you haven't actually applied for a mortgage and just spoke with a mortgage broker, you could apply with another mortgage. If you apply with none you are giving the Sellers side a legitimate reason to argue and claim the deposit for "buyer failure to perform".
  • August 05 2013
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Profile picture for wetdawgs
If I were a seller and was told one day after purchase offer that the pre-approval was removed, I would ask the buyer to try another lender and show proper due diligence for getting a loan.

Is there a clear financial change between getting pre-approved and being told you don't qualify?  
  • August 04 2013
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Not sure when your earnest money was deposited? If it was deposited in that 24-hour period then you'll need to have a mutual release signed by both parties. Not sure how your contract reads, but it should be contingent upon mortgage approval. It doesn't sound like you had a sound pre-approval?

You may want to talk with other lenders and get a more concrete review of your situation before folding on this purchase. 
  • August 04 2013
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Profile picture for Newton EcoBroker
Since in Mass. one does not get to P&S until after the inspection results are in (in general), the Offer to Purchase is your guide here. If there were contingencies or financing, you would need to show good faith effort to apply for a loan by a certain date, which is usually included on most standard offer forms in Mass. This date is typically after the offer is accepted, or perhaps after the inspection or P&S is signed. If you attempt to withdraw your offer prior to a contingency date, you may indeed be in jeopardy of forfeiting your deposit. I would seem you have time to apply for a loan with another lender, unless something has changed in your circumstances and you are unable to get a loan from any other lender. It would be prudent to discuss options with your agent and your attorney, if you have engaged one already for this transaction. I hope it works out satisfactorily for you.
  • August 04 2013
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Were you protected by a buyers agent or did you deal with the sellers agent directly?
  • August 04 2013
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Check your purchase and sale agreement, most of the time the contract is contingent upon the buyer obtaining financing. Work with your Realtor and see if you can find another mortgage company to assist you or see if you can get out of your agreement.

Best of luck to you,
Liz
  • August 04 2013
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