Due Diligence Hindered by Late Loan Documents

[Erika Reed]

Hello BP!

I am really hoping you can help me.  I have been working with a turnkey provider for the last month trying to get a deal together.  I had selected a property, gotten approved for a specialty loan (I have no income but didn't want to put husband on the loan), had an inspection done, and was waiting to sign the loan documents.  Here's where I am having trouble.

My due diligence period was over on December 15th.  Up until that date, things were ok.  I had a fee sheet from the lender laying out my rate, mortgage, type of loan, etc.  The numbers weren't great, but I was prepared to move forward with them.  I did not receive the actual loan documents with the real interest rate and loan terms until December 16th.  After reading the documents, I immediately contacted my transaction coordinator and the loan originator to alert them that things were NOT ok with the loan terms.  My rate had jumped significantly, and there were other errors with the documents.  The lender apologized for giving me a full doc rate on my fee sheet, and that it was her mistake.

After we figured out that the loan was not going to work and I had told them "no deal," the purchase contract was still somehow put into effect on December 20th.  I am now asking them for my $2500 back that was in escrow and subject to a deal working out, but they do not want to return my money, saying that per the purchase contract it is the seller's money now, and that if I had canceled within my due diligence period, then I would have gotten my money back.  

My question to you all is, since I was not able to review my loan documents until AFTER my due diligence period was already over because the lender was "late" in getting them to me, am I right to ask for my money back?  If they continue to refuse, is it worth going through the arbitration?  They have no good answer as to why they put the purchase contract into effect after I told them I wasn't going to go through with that deal.

I appreciate all of your help!