Specific wording in a mortgage denial letter

2 Replies

Our buyer presented us with a letter from her lender stating that her loan was denied.  The letter that we received did not specifically say that her loan was denied.  Is there specific wording that must be used, for example... your loan was denied.  Our contract was not contingent on the sale of her current residence.  We believe that she was not honest with us and that the lender did not do their due diligence and we should receive at least half go the Earnest Money, she of course, disagrees.  

Her letter states:

After further review of your loan we have found an issue with the final approval.  Although you have an extremely high credit rating the debt to income ratio with your existing house has pushed the ratios just above the mark for final approval.  In order for you to get this mortgage you would need to alleviate the burden of your existing mortgage in order to close on the new house.  Since your house is in a good markeying area, hopefully it will sell soon and the loan can change to final approval.  

Let's play devil's advocate and say for a minute that the buyer isn't being honest with you.  Why do you want to force them to close with you?  They'll find another way to get out of the contract (home inspection contingency comes to mind).  Just return the EM and move on finding a new buyer.

Originally posted by @Kon Zel :

Let's play devil's advocate and say for a minute that the seller isn't being honest with you.  Why do you want to force them to close with you?  They'll find another way to get out of the contract (home inspection contingency comes to mind).  Just return the EM and move on finding a new buyer.

 I agree with your line of thinking, but the seller might want to keep some or all of the earnest money rather than trying to force the buyer to follow through with the purchase.