I was recently pre-approved and given Priority Buyer status for an FHA loan with Wells Fargo. After giving
the pre-approval, they then notified me that due to new housing laws, they would not be able to approve an FHA loan in the county that I reside in due to the number of foreclosures in the area! What is the legality of this?! I started a contract with the seller because I was pre-approved, and now I also have to contend with the negative impact that the denied loan will take on my credit report!
I am not aware of any law that states anything to this fact. The only relevance that would have towards a home loan would be the negative impact of the appraised value. This being said, the value of the home and the condition of the home should be the only true factors with regards to the home itself, or the county it's located in for that matter.
Feel free to contact me for further assistance.
The denied loan doesn't affect your credit other than the inquiry. If you had a financing contingency in your contract, you're probably covered there (your agent can advise you better). However, I have not heard of such a thing and am equally as amazed! I am sorry this happened to you. Can you live in a nearby town? Is there other financing available to you? Could the owner of that home perhaps offer seller financing? Good luck.
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Fair Housing and Equal Opportunity