Expert: Jessica Bryan - 8/20/2006

Question
My fiance and I are in the process of buying a new home. It was an inventory home so it got done quicker. We are suppose to close on the 31st of August. Well my fiance got laid off about 3 weeks ago and still had yet been able to find a job. So we chose to get out of the house because we knew we could not get approved. He was the only going to be on the loan because of his credit score. So we called the funding people and they said that they could still go through with the loan because they have a pre-approval stating the Omar was employed and they said the would send it in to see if it would go through with hopes the bank does not call to verify that he is working. We were not really comfortable with that and called back the next day to get out. Well I spoke to the builders and they said that we were already pre approved and signed a contract, which when we signed papers we were not aware it was contract for we were not told. The lady told us that we have to find funding either through a friend of family to cosign but we were under contract and could not break this because there was a default clause and we could be sued for up to 25000.00. I explained to her that we could not so this because he has no job, her comment was tell him to start looking for a job there is some there. I did inform her that he has been applying now for 3 weeks. The question I need answered is, is there any way for us to get out of this contract with out begin sued for 25000 or no because of the default clause? We are suppose to do our walk through Thursday so I would if you have any suggestions I would appreciate it. Also can they make us sign a contract before getting approved for a loan? This is our first home and we are a little confused and frustrated on the whole thing.

Answer
Dear Megan;
What does your contract state under terms and conditions for a loan?  In most contracts pre-approval is not enough since all that does is confirms that as of a certain date the Buyers are qualified to buy a home. There is usually a clause that states that the Buyers must be able to obtain "loan approval".  If the agent and/or builder are trying to say that you will probably be able to get a loan if the lender doesn't try to verify employment, they are committing a serious crime!  That is considered loan fraud and is viewed as criminal behavior. Trying to hide a fact such as this is illegal.  You cannot and should not do it.  The sellers should not do it.  Call the lender immediately and report this to the lender. I am 99.9% certain that you will be released from this contract with no penalty.  If you have any question about this at all call an attorney or the state real estate commission.  Ask to speak to one of their lawyers and confirm that this is true.

Best wishes,
Jessica Bryan
Managing Broker
House to Home Realty Services