Can our lender back out after we have already closed on home?

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Can our lender back out after we have already closed on home?

We closed on a home last week. However there was a form we refused to sign because we didn’t understand it and were confused. It was a loan purpose affidavit stating we could not occupy the home during the life of our loan. After we got some definite answers to our questions we signed the loan affidavit in front of a notary and sent it to the title company. Now our lender says they want our credit report and proof that we’ve made payments on our home that we are living in now. We sent them that but have not made the house payment on the home we live in now for this and last month. They state that if we don’t get them the proof of those house payments that the “deal is dead”. Can they do this after we have already closed? We have paid almost 15K at closing; will we get it all back if the deal is undone? I also want to state that we have already paid the homeowner’s insurance and have switched the utilities into our name.

Asked on December 25, 2011 under Real Estate Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

As a general matter, a lender is not obligated to go through with a loan at any point until the loan itself is actually closed. There are circumstances, which may apply here, which would require them to do so, however. For example, if you took actions to your detriment (closing on the home) based on a representation of theirs that you would get the loan, and your reliance on that representation was reasonable, that may bind their promise to provide a loan--much depends on exactly what was said, by both parties, when. Or if they did not deal with you in good faith, that could provide grounds for a cause of action.

On the other hand, if you did not sign all required paperwork on time, and/or have not been making payments, that could allow them out of their obligations.

You need to consult with an attorney in detail about all the specifics of your situation, since the facts are critical. Bring with you all documents and correspondence. Good luck.


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