The buyers pre-approval letter was terminated 50 days later

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The buyers pre-approval letter was terminated 50 days later

As we were ready to close the lender sent a Statement of Credit Denial, Termination or Change. The buyers had a letter of pre-approval from the lender on April 14. On June 6 the termination letter arrived stating that the buyer had Insufficient income and excessive obligations and they did not meet the secondary market guidelines. Who is at fault here? The lender for not notifying the buyer sooner or pre-approving them in the first place or the buyer for no longer having sufficient funds due to excessive obligations acquired since the time of the pre-approval letter. What are my rights as the seller? What about the earnest monies?

Asked on June 7, 2018 under Real Estate Law, Oregon

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

The buyer, not the lender is at fault:
1) The lender is not in a contract with you and has no obligations to you--including no obligation to inform you that the buyer did not get a loan, and no obligation to you to provide a loan to the buyer. 
2) There is no guaranty of getting, or right to, get a loan; the lender was not obligated to provide any loans at all. 
The buyer is still held to the contract of sale--they need to figure out how to pay for the home. If they cannot, they will be in breach of contract. That will enable you to keep the earnest monies or deposit due to their breach.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

The buyer, not the lender is at fault:
1) The lender is not in a contract with you and has no obligations to you--including no obligation to inform you that the buyer did not get a loan, and no obligation to you to provide a loan to the buyer. 
2) There is no guaranty of getting, or right to, get a loan; the lender was not obligated to provide any loans at all. 
The buyer is still held to the contract of sale--they need to figure out how to pay for the home. If they cannot, they will be in breach of contract. That will enable you to keep the earnest monies or deposit due to their breach.


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