Q: Can I get sued by a home builder for backing out of contract because rates have gone up and my monthly payment is more?
My initial interest rates when got in pre construction contract was at 5.6% and know rates have gone up to 7.5% and our monthly payments have jumped up $300+ from when we gone in to contract. We wrote home builders saying that we may be holding off due to high rates, and wait a year or so. Then home builder basically starts to press us saying they could sue if we don’t close. Which I don’t think they could and is not right to put somebody in a bad scenario what if we can’t afford that.
A:
The answer to your question depends on what the Third Party Financing Addendum to your earnest money contract says. Whatever financing option you selected usually has a provision that reads "with interest not to exceed ___ % per annum." The Buyer is usually required to apply for a loan with that limitation to satisfy your obligations under the contract. Then there is a box for "Buyer Approval." If this boxed is checked and you are unable to secure a loan with interest not to exceed the stated amount, you have the right to terminate the contract. If you have completed the Addendum for FHA/VA financing, you may have the right to cancel the contract for additional reasons as well.
You are obviously in a much better position if the home builder has not begun construction. Otherwise, like you say, it isn't right to put the builder in a bad scenario if you agreed to buy a home being built to your specifications but didn't lock in the interest rate on your loan during construction and now want to back out. In the current market, the builder may or may not be able to sell the home to another buyer.
A: An attorney will want to see your contract and related paperwork to offer meaningful guidance. Good luck
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