I signed a contract to purchase a home in Olathe, Kansas and it was accepted by the seller. I was pre- approved for a mortgage by my real estate agents mortgage company. Now I'm having problems getting a loan approval

Question: I signed a contract to purchase a home in Olathe, Kansas and it was accepted by the seller. I was pre- approved for a mortgage by my real estate agents mortgage company. Prior to getting pre-approved I sent them all the docs requested including tax returns, bank statements, pay stubs and so forth. It is 7 days before closing and now the mortgage company is having problems getting an approval. The mortgage lender is requesting additional documentation and a letter of explanation regarding our tax returns. I feel like this should have been done before prior to going out and looking at homes. Since I'm having problems with financing and we will be missing the closing date, I want to cancel the contract. Can I back out and avoid getting sued by the seller.
Justin K. from Lenexa, Kansas


Answer: Thanks, Justin. Hope I can help you out. First, your issue is with your lender, not your seller, so don't punish the seller because of an issue with your mortgage lender. Request for additional documents is getting to be a common occurrence by mortgage lenders, even up to within 24 hours of closing. Review your contract. If you back out you lose your earnest deposit and the seller may sue you for damages. Now if you back out due to a contingency not being met, that is a different story.


Most lenders give preapprovals but then require much more information to give the final approval. Failure to cooperate by answering the lender’s questions might make that contingency unavailable to you so I would be very careful. I would supply the mortgage company any and all documentation in a prompt manner. If the mortgage company denies you for a loan, even at the last minute, then you can back out due to a contingency.


Remember, I'm a real estate agent and not an attorney. An attorney can review your specific situation and advise.


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