Backing out of deal last minute

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Looking for advice:

Got into contract for my first investment property for an LTR about a month and a half ago. My lender approved me for a secondary home rather than investment property (I didn’t know the difference at the time) which eventually snowballed on me—requiring extra documents, changing contracts, etc. Things got complicated with the loan, we tried to smooth it out with the realtor and underwriter but at the end of the day, it wasn’t enough and I didn’t feel comfortable moving forward.

Long story short, we are submitting a cancellation and mutual release agreement due to inability to obtain the loan. We already pushed back closing once and were days away from our new date. Since this is a breach in contract, I am concerned for a lawsuit.

Have any of you ever been in a situation like this before or walked away from a deal so late in the game? Any advice for steps moving forward? It’s been an incredibly stressful process and any wisdom would be much appreciated! :)