March 11, 2013
A reader asks, “My mom applied for a FHA loan, went through the loan application and was approved. She signed with a builder and they built the house on her property. Two days before closing, the mortgage lending company informs her that she cannot close on her finished house, due to her not having a credit score when they re-ran her credit file.”
“When she was approved she had a credit score. What can be done, her house is built on her property and yet to move in, meanwhile the builder has chose another lending company, and she to repeat whole process over, can the first lending company do this?”
There’s no way to judge what has happened in a situation like this–there isn’t enough information AND there may be number of factors at work including erroneous information on a credit report, mistaken identity, or legitimate causes that can’t or shouldn’t be conveyed in a public forum. Taking the scenario presented here at face value, one thing is clear. The borrower should get in touch with the FHA as soon as possible to request assistance and advice.
Borrowers should always contact the FHA when there are issues like these connected to their mortgage loan applications. If a borrower is confused, feels there may be a lack of communication or suspects discrimination or illegal activity, a call to the FHA is a good idea.
Regarding the specific question, “Can the first lending company do this?” with regard to denying the loan, there are a few questions that would need to be answered before we could say in a hypothetical situation whether FHA loan rules were potentially broken.
If two parties sign a contract, that contract is legally binding unless the agreement is nullified as per the specifications of that contract. To get a definitive answer, the borrower may need to get the help of an attorney who is experienced in real estate law. Retaining an attorney may feel like a last resort for some borrowers, and in some cases it may not be needed if the scenario is covered by FHA loan rules or other legal parameters.
That should not be interpreted as a discouragement from getting legal help, but rather a reminder to do some research on the situation first–is your circumstance clearly governed by the law in some way? Are there FHA loan rules or other requirements that must be fulfilled before the matter can be resolved?
That’s why it’s important to contact the FHA–if you have a situation that is not clearly regulated by FHA loan rules, the Fair Housing Act or other guidelines, the FHA rep may advise you to retain a lawyer based on your specific circumstances. It all depends on the fine details of your situation. It could be that the lender was permitted, under the terms of the loan agreement, to cancel the mortgage if certain conditions are present, or there may be other reasons why this situation is occurring.
Regardless, contact the FHA as soon as possible in cases like these for help by calling 1-800 CALL FHA.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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