Any recourse on bank reneging on a pre-approval?

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I'm buying another duplex in PA. I was pre-approved for 5% down and $250,000 loan amount. The bank then said we could do 7.5% down in order to avoid mortgage insurance, which was great to hear. So I put it in an offer and it got accepted. So since the bank said we're good to go and our offer got accepted, I moved forward on the deal. I paid for inspections, an appraisal, and also put down $10,000 in deposits so far.

A couple weeks pass and the loan officer at the bank sent me a good faith estimate showing 15% down, instead of 7.5%, therefore requiring a larger down payment. I asked why this was, and they said it was just a clerical error. Ok, it happens.

I get a revised good faith estimate a few days later. Same 15% down. I ask why it STILL says 15% down. "It's just an estimate and nothing is set in stone; we'll get it figured out", they say. So I trust their word, and I don't worry.

We are now 2 weeks until closing, and underwriting won't budge. They want 15% down to make this deal work for them, or else no deal, even after I was already approved for 7.5%. And I don't have that extra 7.5% to put down. Luckily I'll be able to get my deposit monies back if the deal doesn't go through (since the AOS says 7.5% down), but not the ~$1300 I spent on the appraisal and inspections.

Somewhere down the line, I feel the loan officer and/or the underwriters at the bank made some sort of mistake. I know and understand fully that numbers from a good faith estimate can change, but only by a reasonable amount. Going from 92.5% LTV to 85% LTV is completely unreasonable.

Has anyone every been in a situation like this? Any recommendations? Do I have any recourse for getting that $1300 back if the deal doesn't go through? Sue the bank/loan officer?

Chris

P.S. I will be speaking with my lawyer about this to get his opinion, but I'd also like to see what opinions you all have.

[Joel Owens]

Chris I do not know any non owner occupied loans for 2 to 4 units that will let you do 5% down payment.

Mortgage insurance isn't dropped a s a requirement until you are putting at least 20% down.

I do not know of any bank that would do a 95% loan without mortgage insurance. With a default and collection and foreclosure costs they would already be upside down on the loan without insurance to help out.

Now if you were going to LIVE on one of the units and go FHA or conventional than the loan programs and down payment change. You still have mortgage insurance even with the low down payment though. The banks have to hit a DSCR usually of 1.20 to 1.25 to fund a loan. In your case with 5% down it's 1.05 which most banks wouldn't touch unless in some cases for commercial where it's a 100 year old tenant investment grade business like a Walgreens or CVS.

I do not know what recourse you have. Everything you have said regarding this mortgage broker sounds like they do not know what in the heck they are talking about. A good mortgage broker knows all the details even if working for a local bank on what the underwriter will go for or not.