Equity Home Loans

Is this ethical or unethical? Legal or illegal. How does one pursue this case?

I signed a Purchase Agreement in February 2007 to purchase a Hubbell Home in Waukee. According to the purchase agreement, I had to obtain a "loan commitment or loan denial" by April 21st. Basically a loan commitment would mean I must purchase the home when it is ready or I could be liable for all costs and a loan denial would have meant I can't buy the home, therefore I am not liable to Hubbell for any costs. In April, I recieved a "loan commitment" from Wells Fargo Home Mortgage, based on my credit rating of 751, my assets of $20,000 and less than 1 year of proven income totalling approximately $28,000. From what I've heard recently from many people is that I SHOULD NOT have been approved for a $159,000 mortgage based on that income and less than 1 year income. But I was. And Wells Fargo says I was approved because my credit and assets. Since then, I have lost my job. – The home still isn't complete yet (new construction) and I CAN'T back out of this purchase because my "commitment" was already approved back in April. Hubbell plans on taking action to recover costs against me if I don't buy this house.

Public Comments

1. (1) Well, it's a contract. They signed up based upon your commitment to purchase. You are apparently going to breach this agreement by not purchasing. They have a right to exercise on the contract. I don't see how that's unethical (except that both Hubbell and WF had a pretty good idea that your finances were tenuous when you were looking to purchase a home). (2) You may have reasonable defenses on the contract. For example, you may be able to argue that it's unconscionable, that you did not understand that the "loan commitment" meant that YOU (not WF) had to pay costs if you didn't buy, or that Hubbell has previously breached the contract (by not getting the construction done soon enough, if that's the case) or that Hubbell can't recover unless it attempts first to "cover" its costs by finding a new buyer. I would expect that if you back out, Hubbell will bring a claim, either for costs its lost in securing you as a buyer, or for "specific performance" (i.e. 'forcing' you to buy the house). These are just options. You should seek assistance of an attorney licensed in your jurisdiction. If you live near a law school, there may be a "legal clinic" that could help with this, or you could look for your state's legal aid society, which has good experience helping people in real estate matters, free of charge.
2. i suggest you start looking for a new job, your the one that agreed to buy the home, your the one that applied to wells gargo for the loan and yes you were approved because of being a 1st time home buyer, 2ndly your credit score, and your assets. so get out there get job hunting and find a job to pay for the house you already signed the papers to buy
3. Did you buy mortgage insurrance? This covers your mortgage payments if you are disabled, unemployed, or otherwise unable to make payments. Are you making mortgage payments on a house you are not occupying? Can you sell your interest in the house to a third party? Is there a liquidated damages clause in your contract, prior to actual occupancy of the residence? As a last resort, you may want to speak with a bankruptsy attorney...Only as a last resort. Good luck!
4. Depending on the down payment you should buy the house if at all possible. Jobs are always easy to get if you have commitments and the equity earned can be of good value for the rest of your life.
5. Well - 1.) You signed the contract saying you would buy this house. So therefore you are on the hook for the house, or whatever the contractor comes after you for. 2.) YOU knew YOUR income before YOU applied for the loan - if $159,00 wasn't doable for you then well.....you should have been a little wiser before signing the contract. Anyone with half a brain can see that with an income of $28K you would be stretched to the max financially by a mortgage for that amount. But hey - you signed the contract. 3.) I don't see anything unethical or illegal here - you were a bad consumer who got into a bad position that in the end may bite you in the butt. If I were you I would look for a job ASAP - and consider a second one to help make this payment so that you can at least not loose your shirt in the deal.