I recently got married and entered into a contract to buy a condo for $105k. We were actually renting the condo and signed a purchase agreement with the landlord on 9/1. The condo complex was not FHA approved so we had to go for a convential loan at 5% down. Our loan officer pre-approved us for 200k and submitted a loan application which was conditionally approved on 9/17 with Franklin American mortgage company. The condo appraised at 105 easily because of a recent sale in June next door with an identical unit...
Then things went haywire. While my FICO-5 was at ~675, the underwriter set a condition that all disputes be removed. 
- I had one CO in 2009 for Discover card ~$2,000. I had a few others which have all been paid off. This baddie will be deleted automatically in the spring. Anyway, when the dispute was removed on 10/5 - my score fell off a cliff to 615.
The loan officer decided to take me off the application and move forward just with my wife as she makes 65k per year and has a FICO-5 ~ 715. That application was sent and conditionally approved as well. Then the underwriter put a suspense notice on the file - 1.) Wife's debt ratio was too high because of student loans (100k+ for a doctoral degree) 2.) The condo association did not set aside 10% of their annual budget for a reserve account. The loan officer figured the only way to get around this is improve my score to 620 FICO-5 to get me back on the application and also increase our downpayment so we can go around the full review of condo financials in a "limited review" with 10% down.
At this point, our loan officer issued us a denial certificate 2 days before our expected closing date. My question is - our seller is refusing to return our earnest money deposit of $5,000! He is stating that we passed our finance contingency date (9/30) and were in default for the contract. Our attorney and mortgage broker seem to believe this is unfair and unheard of in their experience. The denial was issued mainly because the underwriter flagged the issue of the condo reserve account as insufficient collateral. We werent provided with the condo budget by the property manager until 10/7.
Is there anything we can do? Taking the seller to small claims would result in legal fees around 2k with no definitive outcome and also the possibility for counterclaim if we lose for the seller's legal gees. He is being difficult and unreasonable regarding return of any of our money.
What should we do?
@Anonymous wrote:I recently got married and entered into a contract to buy a condo for $105k. We were actually renting the condo and signed a purchase agreement with the landlord on 9/1. The condo complex was not FHA approved so we had to go for a convential loan at 5% down. Our loan officer pre-approved us for 200k and submitted a loan application which was conditionally approved on 9/17 with Franklin American mortgage company. The condo appraised at 105 easily because of a recent sale in June next door with an identical unit...
Then things went haywire. While my FICO-5 was at ~675, the underwriter set a condition that all disputes be removed.
The loan officer decided to take me off the application and move forward just with my wife as she makes 65k per year and has a FICO-5 ~ 715. That application was sent and conditionally approved as well. Then the underwriter put a suspense notice on the file - 1.) Wife's debt ratio was too high because of student loans (100k+ for a doctoral degree) 2.) The condo association did not set aside 10% of their annual budget for a reserve account. The loan officer figured the only way to get around this is improve my score to 620 FICO-5 to get me back on the application and also increase our downpayment so we can go around the full review of condo financials in a "limited review" with 10% down.
At this point, our loan officer issued us a denial certificate 2 days before our expected closing date. My question is - our seller is refusing to return our earnest money deposit of $5,000! He is stating that we passed our finance contingency date (9/30) and were in default for the contract. Our attorney and mortgage broker seem to believe this is unfair and unheard of in their experience. The denial was issued mainly because the underwriter flagged the issue of the condo reserve account as insufficient collateral. We werent provided with the condo budget by the property manager until 10/7.
Is there anything we can do? Taking the seller to small claims would result in legal fees around 2k with no definitive outcome and also the possibility for counterclaim if we lose for the seller's legal gees. He is being difficult and unreasonable regarding return of any of our money.
What should we do?
I went to a similar situation as you all and know first hand the amount of stress this is probably causing you all. I was on a contract to purchase a condo, but unfortunately HOA didn't have a budget reserve. I was stressed about losing my $5000 earnest deposit. Fortunately, the bank of the REO property was understandable and allowed me 2 closing date extensions which gave me enough time to find a Lender who finanance Unwarrantable Condos and we closed the deal.