Real Estate Law Blog : Staten Island Real Estate Lawyer » mortgage approval http://www.thenyrealestatelawblog.com by Steven T. Decker, Esq., Real Estate Attorney Wed, 17 Jun 2009 17:06:19 +0000 http://wordpress.org/?v=2.8.2 en hourly 1 I Can’t Get a Mortgage Will I Lose My Deposit? http://www.thenyrealestatelawblog.com/i-cant-get-a-mortgage-will-i-lose-my-deposit/ http://www.thenyrealestatelawblog.com/i-cant-get-a-mortgage-will-i-lose-my-deposit/#comments Fri, 22 May 2009 19:19:06 +0000 Sdecker http://www.thenyrealestatelawblog.com/?p=135 credit denied 150x150 I Cant Get a Mortgage Will I Lose My Deposit?Buyers and sellers often wonder what happens if the buyer can’t get his mortgage approval, does the seller get to keep the buyer’s deposit.  Especially when a buyer had a prequalification letter issued from a mortgage broker.  Once the contract was signed the seller couldn’t sell to another so shouldn’t the buyer lose something for failing to get the mortgage and buy the house?  The simple answer is if the contract has a mortgage contingency clause then the buyer should be able to get his money back.  But getting the money back isn’t always so simple.  The seller can ask that the buyer present a proper denial letter or the seller may refuse to allow the down payment to be released to the buyer.  To properly cancel the contract and receive a refund of the deposit a buyer must deliver a denial letter from his lender which shows that the buyer submitted a complete application which was denied.  If the denial letter is timely submitted and the reason for the denial is reasonable the contract deposit should be returned to the buyer.

If a buyer needs a mortgage the contract make sure you contract contains a mortgage contingency clause.  This gives the buyer a certain amount of time (usually 30 -45 days) to submit an application and get an answer from his lender.  If the application is approved a mortgage commitment is issued, the contingency is satisfied and the buyer must purchase the house.  If at the end of the contingency period the lender has not made a decision (approval or denial), the buyer must ask the seller for more time to get the answer and the seller can decide to give more time or cancel the contract and refund the deposit.  When the mortgage application is denied the contingency allows the buyer to cancel the contract and receive a return of his contract deposit.

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