Home Buying in 06705>Question Details

Leslie, Home Buyer in 10475

Can you back out of a contract if after the loan process your mortg. you can't afford the payment quoted?

Asked by Leslie, 10475 Wed Oct 6, 2010

After reviewing the estimated numbers for our fha loan, we are not sure if we still can afford the payments? Is this enough of a good reason to withdraw from the contract? The contract was already signed and the home inspection is in a few days.

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Leslie,
Shop rates, (fha will always be some what higher because it is a riskier loan for lender). That spoken loan officers quote different rates and because you were pre approved by one does not meam you are obligated to use that one. If you wish to pull out after signing contract there is only one person to talk to. Your attorney!
Once a contract is signed its the attorney who is in control of the transaction. Good luck and Happy Holidays!
Andy
0 votes Thank Flag Link Fri Dec 24, 2010
Thank you all for your responses. We were indeed pre-approved prior to undergoing the contract and deposit. We just submitted all the documentation for the FHA loan and on paper it looks like we can afford it, it feels like when considering other expenses, oil, electricity, water, utitlities and food and not to mention veterinary care for our 3 cats, we think we may have gone over our heads. We are life-long apartment dwellers and we didn't seriously consider the costs of upkeep. But as a post mentioned earlier, we may just not be getting the best rate. This is something definitely to look into. Any more ideas, plz let me know. I learned a lot from every response.
0 votes Thank Flag Link Thu Oct 7, 2010
Why are the figures so far off? You may want to contact someone else to get a quote. Is it that your FHA case number was obtained after 10/3 so that the monthly PMI was higher than you thought? Rates are great right now, you may also be dealing with someone who isn't offering you the best rate. I had someone contact me when they were just about ready to close on a refinance. They were being quoted a rate by a MAJOR bank that was a full 1% higher on a conventional loan, and .5% higher on FHA, than what I could obtain for them.
0 votes Thank Flag Link Thu Oct 7, 2010
What is your agent advising, and what exactly does your contract state as far as backing out, review the docunment as the answer lies in it--if you don't have an agent, do consider a consultation with an attorney who specializes in real estate, then go from there.
0 votes Thank Flag Link Thu Oct 7, 2010
It depends on your contract. What contingencies do you have in place? If your Realtor thinks you can't back out, then perhaps you just lose your 1st deposit which is probably better than losing your 1st, 2nd and inspection fee.

You may also want to get a 2nd opinion on the loan. Talk to another lender.

But let me ask you this - do you still want to buy the house? If so, is there an amount the sellers can contribute to you help lower your payments or free up some cash so you can proceed? You can negotiate the contract as part of your home inspection - closing costs e.g.
0 votes Thank Flag Link Thu Oct 7, 2010
Leslie,

If your financial situation has changed since initially applying for your mortgage or if you expect that it may, you should consider taking this information to your lender. This adjustment may change your qualifications for the mortgage and create an avenue to exit the agreement.

Our recommendation is to begin by consulting youe lender to review your application. If you doubt your financial ability to handle this, they should hear and understand your concerns. They also may be able to find the confidence you require to complete your transaction.

Best of luck,

Bill
0 votes Thank Flag Link Thu Oct 7, 2010
Without even considering the financing affordability I would think the inspection contingency provides an easy out for the buyer. Once the inspection and financing contingencies expire it becomes a bit more difficult so your attorney should be involved to advice of options that may allow you out of the legally binding contract.
0 votes Thank Flag Link Thu Oct 7, 2010
Love it when agents say sure without knowing how YOU wrote the offer... immediately speak with your realtor and see what you put in and time frames for those contigencies... in 15 years I've written and seen written contracts in many ways... and depending on the type of property... like REO doesn't follow the same rules, and neither do some short sale banks... so READ your documents carefully...

Secondly... you should have known your numbers before you wrote the offer... Best not to shop without the financials in order...

Run to your realtors office! Good luck
0 votes Thank Flag Link Wed Oct 6, 2010
Generally you are protected by the mortgage contingency - sounds to me since the inspection has not yet taken place, that you do not have a mortgage commitment as of yet. But I do agree with the other posters that it is surprising that you've gotten this far - perhaps your FHA preapproval was not thorough enough because the guidelines are quite strict when it comes to ratios. If you can't afford the payments, then you likely will have trouble with the commitment, in which case, you should be protected. Suggest you talk to an attorney to get the best answer on cancelling the contract and trying to protect your escrowed down payment.

Good luck,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Wed Oct 6, 2010
You really need to talk with your lender about this. FHA has strict guidelines as to the percentage of your income can be for the mortgage, etc just so people don't get into these situations.
0 votes Thank Flag Link Wed Oct 6, 2010
You might lose your good faith deposit if you pull out now. I am surprised you got this far without a sufficient prequalification -- how did your FHA lender qualify you anyway? There is typically a full financial check to make sure you are not getting in over your head. In fact they check to see your total monthly payments including credit cards, auto and home loan payments do not exceed a certain threshhold of your income. Did you provide the loan officer accurate information to begin with?
0 votes Thank Flag Link Wed Oct 6, 2010
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