Can I get my deposit back if I was not approved for a loan?
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Can I get my deposit back if I was not approved for a loan?
I offered to buy a home with 20% down with a conventional loan. However my loan officer suggested that I would do better a15% FHA. 30 days later I got the letter from the bank that I was not qualified for the loan. Now the seller’s listing agent won’t give my deposit back; her reason was that I didn’t do the 20% as I promised on the contact. The reality is that I am not even qualified for any loan in the first place and that the bank made a mistake to pre-approve me (I had to file bankruptcy 6 months ago). What should I do so I can get my deposit back? I haven’t remove the loan contingency.
Asked on July 1, 2011 under Real Estate Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Deposits are *not* generally refundable--after all, the purpose is to incentivize the seller to enter into the transaction by making the buyer put skin in the game and providing compensation to the seller if the buyer walks on the deal for any reason.
If there is a finance contingency, that will usually permit a refund if the buyer can't get the financing--*except* that the buyer must apply for the financing and use best efforts to get it. Furthermore, the buyer must apply for the financing indicated on the contract of sale. If the contract you signed called for 20% down and a conventional loan, if you did not apply for that type of loan, you may be in breach of contract and not eligible to get your deposit back under the financing contingency.
That's just a general analsys: to understand your rights, remedies, and obligations under the specific fact of your case, you should bring the contract, any documentation re: the loan, etc. to a real estate attorney who can review them for you--the specific language of the contract is critical.
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