I am currently in the process of buying a home for the first time. Everything has gone pretty smooth so far. Our bid was accepted, we had the home inspected, we signed contracts, met with a mortgage company, etc. The mortgage company gave us a commitment letter stating exactly how much the bank would givs us. He knew from the beginning that we would only be putting down 5% which was also stated in contracts. He went on and got the apprasier in and everything. Yesterday, we receive a call from him stating that our mortgage cannot go through unless we give a 10% down payment because the market value in the area we are moving is decreasing. Can he all of a sudden do that to us and drop us if we don't give 10%? Could that be true? :confused:

Hello j:

It sure could be. Those guys are pretty slippery. I know because I was one. Shop around for another mortgage. They're not all the same.

excon

I think this is actually mandated by new laws dealing with the subprime mortgage crisis. Certain areas have deen designated as declining value areas. Mortgages in such areas are required to have a larger down payment to protect both borrower and lender.

I would go back to the lender and point out that you have a commitment from them that hasn't expired. So what gives them the right to renege on that commitment. He will probably cite recently passed legistaltion, in which case you are stuck and need to come up with a larger down payment or a new lender.

Hello again, J:

Scott hammered the key issue here - the commitment letter. If they indeed, committed, I think they can be held to it.

I suspect, however, that it wasn't a commitment letter at all. It was just one of those qualification letters telling you how much house you can afford to buy based upon your income. You say the lender "knew" that you were only putting down 5%, but was it noted in the "commitment" letter? Nahhh. It wasn't.

excon

Even if there was a commitment it probably contained language that the bank would provide the loan as long as there was no change in conditions. The designation of the property as being in a declining value area would be a change in conditions that would allow them to back out.

If you can't come up with the additional 5% you should try looking for a new loan.