Backing out of purchase contract in Folsom, CA

[Rosell Kal]

Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.

30 years fix, 20% down it will be -$900 per month negative cash flow.

6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month. 

Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.

[Shaun Weekes]

Quote from @Rosell Kal:

Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.

30 years fix, 20% down it will be -$900 per month negative cash flow.

6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month. 

Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.

If the numbers don't workout get out of the contract if you can. Speak with your Realtor to figure out options etc. Also, your loan officer knew this property wouldn't be closing for 6 months so it's too bad they didn't lock the rate accordingly.

Have a good one.