Using the term default seems odd to refer to you not meeting your closing date. I think the only money at stake here is your earnest money deposit, but since you don't have a real estate agent representing you, you may now want to hire an expensive real estate attorney to step in.
Sounds like your parents are buying you a home to live in and claiming it as their primary residence when they won't be living in it? If true, your parents are committing loan fraud and all of you could be subject to federal prosecution.
The fact that the loan is not approved yet is a sign there are problems with you your parents loan....like maybe the lender is sensing occupancy fraud? Or it could be a 50 other things causing the delay.
You've been in contract since July of 2012? And you lender sent over a fake loan commitment to the builder? Who is your lender?
And to make it worse, the CHDAP program has been suspended as of Jan. 25th. Did your lender tell you? They probably don't even know. http://www.calhfa.ca.gov/homeownership/bulletins/2013/2013-01.pdf
Once you receive actual loan approval and get all conditions signed off, your file is then sent to CHDAP for review. It will sit on some paper pushers desk for 10-14 days until the approve it....maybe longer with the CHDAP suspension.
Between waiting to get loan approval, then waiting for CHDAP to get un-suspended, then get CHDAP approval, you are still another 30 days from closing escrow.
The builder can probably close escrow with another buyer and possibly even sell it at a higher price now.
One alternative to using the CHDAP down payment assistance program is the CHF Platinum grant or the CHF Access assistance program. All three are similar tot he CHDAP but cost way more and have a higher payment.
You can compare the CHDAP, Platinum and ACCESS programs in the web reference link below......I hope that helps because I haven't heard of one lender yet who will take the time to explain in detail that the ACCESS and Platinum are your worst options for down payment assistance.
Here is my recommendation:
1. Speak to your lender. Find out what is going on. Ask why they have not communicated any problems to you?
2. Upon speaking with your lender, you may need to speak to your Realtor if you have one or communicate to the builder what your intentions are.
3. If you are having issues with communication with your lender, there may be a problem with the lender as a whole. Seek a second opinion, but do not waste any time.
Feel free to contact me at 951-210-2101 for any additional questions. Also feel free to look up my website at http://www.impacmortgage.com/edeleon and or my facebook page at http://www.facebook.com/LoansByEddie
Eddie W. de Leon
In times like this, communication is most important. You, the lender and the builder should be communicating. If your lender thinks he can get the loan, the builder should be asked for an extension of time in writing. Ask the lender about the implications to your credit. That should be his specialty and he/she should be able to explain it to you. If the lender misled you and the builder wants to charge for an extension, ask the lender to "participate" in paying the charge.
If your lender sent a fake approval lender to the builder, he is being dishonest (the definition of fraud). If he fails to get the real approval, this "shortcut" to buy time could cost you. Builders wait until loan approval to lay flooring because flooring is an option the buyer chooses. Not all buyers have the same taste and they may have to take a loss to sell the home to someone else.
You need to read your contract and/or hire an attorney to do it for you. Everything should be spelled out there. If you are buying the home and have signed a contract stating that it is going to be YOUR primary residence and you do not intend to live there, you can be arrested for fraud. Fraud means lying in order to get something. It's a crime.
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
9am till 9pm 7 days
Like Brad says, at this point I doubt you would lose out on anything more than your earnest money deposit. Further, your credit wouldn't be damaged if you don't get approved for the loan - it's a myth that if you don't get approved for a loan then it's reported to the credit bureaus.
If it was me, and I no longer cared if I bought this home anymore, then personally I would not get a lawyer as they can cost upwards of $100-200/hr. I would just talk directly with the builder and ask them if 1) they would allow me more time to close/extend the contract, and if so, would there be any financial penalties for not closing by the initial agreed upon closing date, and 2) if I were to cancel the transaction what money would I forfeit and what portion could I get back, if any.
You can report this lender via http://nmlsconsumeraccess.org/ (look up their company name, the loan officer name, and where it says "State Licenses/Registrations", under "Consumer Complaint" there should be a hyperlink which says "Submit to Regulator" and it'll bring you to the website of that licensing authorities complaint page.
Shane Milne | Lending in all 50 states | NMLS #81195
Crazy how lenders actually provide pre-approvals for borrowers who don't actually qualify.....in this case it was actually intentional! But it's not the first time, nor will it be the last. No one qualifies for CHDAP under 640 score.
You should sue that lender for gross negligence.
Your terms are a bit confusing, you are the ones getting a loan approval, not the builder. What is your lender telling you? You need to be in constant contact with the lender to get the loan approved. The builder is saying that you will default (break the rules in the contract) if you can't close the loan by the date in the contract. These dates are often somewhat flexible, your lawyer can advise more on that when they read the contract. Most contracts say that if you can't get a loan then you get you deposit back, but a builders contract could have omitted that since they write them favoring them and not you. See the lawyer for advice.