Lender terms changed after going under contract

[Sam T.]

I obtained a signed pre-approval from a lender for a short-term rental (STR) investment at 80% LTV. This pre-approval was specifically tailored for the STR investment I had in mind. However, shortly after securing the property under contract, the lender notified me of an error on their end, stating that the property's is rural for them and hence mandates a reduced 70% LTV. This adjustment leaves me uncomfortable, as it would deplete my emergency funds.

I'm exploring options within the financial contingency outlined in my contract. Can I leverage the change in terms to invoke the financial contingency clause? Additionally, other lenders are offering either a 70% LTV or unfavorable rates at 80%.

[Raymond J. Rodrigues]

I’m sure you can have a loan denial issued if you state that you do not have enough funds in place to make this happen, which will allow you to exit your contract because of not being able to meet the financing approval period. Truth be told, the less money you put down, the higher the rate. Vice Versa.   Regarding loan terms changing after the appraisal was done most likely and the appraiser marked the property as being considered rural, is not something a loan officer can entirely know in advance if they are not local to the area.