Buyer Mortgage Lender Bait and Switch

[chaotix]

New York... A Purchase Sales Agreement signed between seller and purchaser specifically states that the buyer is going to use a first mortgage loan other than FHA, VA or other governmental loan programs, additionally, there is no clause and/or addendum for buyer to use any of these governmental programs on the purchase sales agreement contract.

My Question is: Does the buyer forfeit their earnest money deposit if they make application for FHA loan in lieu of a conventional loan as agreed on the purchase agreement?

The seller/purchaser signed a contract with knowledge that it would be a conventional loan, because the rules with FHA would have changed the entire deal, as the offer and acceptance price would have been negotiated differently had the seller known that it was an FHA loan. Thanks for your answers!

 

[HomeGuru]

New York... A Purchase Sales Agreement signed between seller and purchaser specifically states that the buyer is going to use a first mortgage loan other than FHA, VA or other governmental loan programs, additionally, there is no clause and/or addendum for buyer to use any of these governmental programs on the purchase sales agreement contract.

My Question is: Does the buyer forfeit their earnest money deposit if they make application for FHA loan in lieu of a conventional loan as agreed on the purchase agreement?

The seller/purchaser signed a contract with knowledge that it would be a conventional loan, because the rules with FHA would have changed the entire deal, as the offer and acceptance price would have been negotiated differently had the seller known that it was an FHA loan. Thanks for your answers!

**A: post the exact financing contingency clause as stated in the contract.
Do not interpret or paraphrase.

 

[chaotix]

Exact Contingency Clause (Verbatim)

8. Mortgage Commitment Contingency

(a) The obligation of Purchaser to purchase under this contract is conditioned upon issuance, on or before 30 days after a fully executed copy of this contract is given to Purchaser (April 10, 2009) or Purchaser’s attorney in the manner set forth in paragraph 25 or subparagraph 8(j) (the “Commitment Date”), of a written commitment from an Institutional Lender pursuant to which such Institutional Lender agrees to make a first mortgage loan, other than a VA, FHA or other governmentally insured loan, to Purchaser, at Purchaser’s sole cost and expense, of $455,000.00 for a term of a least 30 years (or such lesser sum or shorter term as Purchaser shall be willing to accept). To the extent a Commitment is conditioned on the sale of Purchaser’s current home, payment of any outstanding debt, no material adverse change in Purchaser’s financial condition or any other customary conditions, Purchaser accepts the risk that such conditions may not be met; however, a commitment conditioned on the Institutional Lender’s approval of an appraisal shall not be deemed a “Commitment” hereunder untial an appraisal is approved (and that if does not occur before the Commitment Date, Purchaser may cancel under subparagraph 8(e) unless the Commitment Date is extended). Purchaser’s obligations hereunder are conditioned only on issuance of a Commitment. Once a Commitment is issued, Purchaser is bound under this contract even if the lender fails or refused to fund the loan for any reason.

(e) If no Commitment is issued by the Institutional Lender on or before the Commitment Date, then, unless Purchase has accepted a written commitment from an Institutional Lender that does not conform to ther terms set forth in subparagraph 8(a), Purchaser may cancel this contract by giving Notice to Seller within 10 business days after the Commitment Date, provided that such Notice includes the name and address of the Institutional Lender(s) to whom application was made and that Purchaser has complied with all its obligations under this paragraph 8.


There is no addendum or any mention in the contract whatsoever of FHA financing/loan.

My Question is: Does the buyer forfeit their earnest money deposit if they filed for an FHA loan and/or the loan is not approved? If I had known it was an FHA loan I would have changed the entire deal, as the offer and acceptance price would have been negotiated differently. The buyer has $40,000 down in earnest money deposit. Thanks!!!!