Is it legal for a lender to approve your loan and send you copies of the loan but then decide on the last day of escrow not to give you the loan?

Asked on July 30, 2015 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

It depends what you mean by "approve." If they notified you that you actually had the loan, then unless something changed or unless they reserved the right to change their mind later (e.g. there was something in the loan documents stating that the loan was not yet final), then no, they should not be able to do this. If they reneged on the loan after final approval, without it being due to some reservation of right or change in circumstances (though note: if there was some relevant change, like a reduction in your income, they could certanly then call off the loan), you may be able to sue them for any losses, damages, additional costs, etc. you incurred, such as under a theory of promissory estoppel (that you reasonably relied on their promise to make the loan) or possibly for breach of contract.

However, if they never told you that the loan was final, but rather merely said you were "approved" for a loan, that is not the same thing. Being approved for a loan merely means you meet the criteria for a loan and are "loan worthy", but it does not guaranty getting  the loan and the lender could decline to issue it. Only if you were told that you were absolutely getting the loan might you have a cause of action.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.