Backing out before closing?

Taking out a mortgage is one of the biggest possible decisions of one’s life. There are various factors which you need to consider and even check out your affordability. However, what if an emergency arises just before the mortgage closing and you start thinking “can I back out of a home purchase before closing"? Let’s take a look as to what you may face:


Are you bound by contract before closing?


Well, unless you sign the closing documents, you’re not bound by any kind of contract. So, it is quite easy to call up your lender and let him know that you won’t go ahead with the deal.

What are the main reasons for canceling the deal?


Here are some of the reasons which normally lead to cancellation of mortgage deals before closing:



• If anything changed on your approval with the lender, then you may cancel the mortgage deal.


• If the seller has misled you regarding the property, then the deal can be canceled.


• If you have a contingency for the inspection and the inspection was bad, then you may cancel the deal.

However, developing a cold feet or losing interest in home buying won’t be considered as reasons for canceling the deal.


What can happen if you cancel the mortgage deal?



Here are some consequences that you may face if you cancel the mortgage deal:



• You may lose the earnest money deposit.


• If you have engaged a legal counsel, then you may be billed for the work done.


• If you were working with a realtor, then you may be billed for his/her services as well.



It should be noted here that when you accept the purchase contract, the seller loses the right to market the property or accept other purchase contracts. So, if you’re thinking “can I back out of a home purchase before closing", then you should also keep the consequences in mind.


However, under the Truth-In-Lending Act, a borrower has the right (Right of Rescission) to withdraw from the deal within 3 days after closing.