Financing Contingency Issue

Hello all.

A little advice would be much appreciated. We live in Wisconsin. My
girlfriend and I put an offer on a house at the end of February and had
been pre-approved for a mortgage at 6.25%, or so we thought. Time came
and went and we had been assured over and over that the rate was good
and closing costs were in the range of 1,500 bucks. However, 5 days
prior to our financing contingency running out the lender had said the
interest rate had increased to 6.75% and closing cost to $5,000!!!!

Contingency was written as such in the offer: FINANCING CONTINGENCY:
This Offer is contingent upon Buyer being able to obtain a 30 year
fixed rate conventional first mortgage loan commitment as described
below, within 30 days of acceptance of this Offer. The financing
selected shall be in an amount of not less than $208,000 for a term of
not less than 30 years, amortized over not less than 30 years. Initial
monthly payments of principal and interest shall not exceed $1314.70.
Monthly payments may also include 1/12th of the estimated net annual
real estate taxes, hazard insurance premiums, and private mortgage
insurance premiums. The mortgage may not include a prepayment premium.
Buyer agrees to pay a loan fee not to exceed --% of the loan. (Loan fee
refers to discount points and/or loan origination fee, but DOES NOT
include Buyer's other closing costs.) If the purchase price under
this Offer is modified, the financed amount, unless otherwise provided,
shall be adjusted to the same percentage of the purchase price as in
this contingency and the monthly payments shall be adjusted as
necessary to maintain the term and amortization stated above. CHECK AND
COMPLETE APPLICABLE FINANCING PROVISION AT LINE 159 OR 160. FIXED RATE
FINANCING: The annual rate of interest shall not exceed 6.5%.

So as soon as we found out that we were above the stated maximum
interest rate in the financing contingency we asked the lender for a
denial letter which stated he could not get us a requested rate of
6.25% but would counter offer at the 6.75% rate. On the letter there
was a checked box that stated the reason for denial was due to
incomplete credit application, obviously because after we found out the
rate was 6.75% we cancelled the application process knowing we did not
want the loan at that rate. However, we did make a good faith effort
in trying to get a loan from this company as seen by us sending them a
$495 application fee.

After this our realtor advised us to call a couple of other companies
to see if they could get the rate within the specified terms. None
could. So we sent the letter of denial from the lender to the seller's
2 days prior to the expiration of the financing contingency.

Our realtor in the meantime had mentioned to us (and the seller's) that
he knew someone that could get us a rate of 6.5%. I spoke with this
person, but did not give them social security numbers I simply gave
them what i remembered off the top of my head our credit scores were,
and he state they he could do the rate at 6.5%. So he said he could do
it but had never run a "real" credit number or social sec # on either
of us. Because of the fact that it would take upwards of two weeks to
finalize the loan with this lender, and who knows what could change in
the meantime to the rates, we decided that it wasn't worth the risk and
that we would go along with the financing contingency.

However the seller's have a different opinion. One of them is a lawyer
and is now saying that we are required to use the lender mentioned
above that could get us the rate otherwise we are in breach of contract
and they will sue us for everything but the kitchen sink.

My question is, how much legal ground do they really have? Didn't we
make a good faith effort to get a loan with the first mortgage company?
Are we required to hunt down a dozen mortgage brokers to get a loan
within the terms? Or are we in the right and have the right to
exercise our contingency?

Thoughts....advice...

Thanks,
Kevin

.

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