 smise2001
Joined: 27 Nov 2008
Posts: 1
1.47 Dollars($)
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Posted: Thu Nov 27, 2008 1:02 pm Post subject: Can I avoid losing my earnest money?
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I'm in Texas, I have a contract to build a home with a home builder, with no contingency on selling my existing home. I have paid $5k in earnest money and $3500 in option upgrades. I have a home I'm trying to sell, but no offers yet. The new house was just completed, a month and a half earlier than original estimates. Since they aren't building many homes these days, their crews are knocking out these homes faster than ever. It was done in 4.5 months instead of the estimated 6. In the contract, I have 5 days to close once the home is completed. The builder called and said if I'm not ready, they will market the property for sale and take my earnest money as damages for not closing. They said they would extend and work with me if I had a contract on my existing home.
So all that is fun stuff, and I regret getting myself into it without a parachute, but who knew the economy was going to tank a month after I signed the deal. I know I should never have signed up without a contingency and I'll never do that again, especially when I have renovations underway.
Anyway, shortly after signing the contract, I visited the sister mortgage company and was pre-approved. I had practically zero debt and enough in my 401k to cover reserves. After that, I racked up a few credit cards to cover the cost of renovations in the existing home, including a loan for 50% of my 401k. I had the intention of selling my home well in advance of the builders original estimated closing date, so I was planning on paying it all back with the proceeds, then putting what I thought would be a substancial (15%) downpayment on the house.
keep in mind also, the moprtgage company signed me and my wife up for credit repair during the process, due to me having had a bankruptcy just over 3 years prior. Chasing down all the lenders to update the credit agencies with correct information was taking me longer than I expected, so I agreed the service would expedite that.
So I finally make it to my real question, can I go to the lender with my latest statements, my new (lower) credit score because of the new debt, and get rejected for the loan, then request my earnest money back due to not qualifying financially to purchase the home?
It is a shot in the dark, but I thought I remember someone telling me that if I don't qualify for a loan, Texas law prohibits the builder from taking my earnest money.
My only other choice at this point is to aggressively reduce the price of my existing home to try and get a contract I can take to the builder in the next few days. There might be a chance that with this lower price, I induce a bidding war for my home, as it is almost the lowest price out of 450 homes in the area and in excellent condition with all the recent upgrades.
Even though my income is good enough, with my credit score and new debt, I doubt I would qualify to purchase a second home. I could do this by getting the equity out of the existing home, payoff the debt, and use as a downpayment. I think then I would be putting myself in additional jeopardy, too much risk to take on at this point and in this economy. I might end up losing both houses if I were to lose my job or anything bad happen.
So, if you have any other ideas, I'd appreciate your input. Thank you in advance for taking the time to read this posting. |
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jameshogg
Joined: 20 Dec 2005
Posts: 10460
Location: Nevada
987.57 Dollars($)
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