Can a Buyer "Switch" Loan Types after Contract is Signed?

Have you ever had a buyer want to switch to a different type of loan mid-stream?  Usually there is a good reason for doing so...but what if it costs the seller for them to make the switch, or it delays the closing???? What are the sellers options if this occurs?

Release Date: 8/18/2015
QUESTION: If buyers state in an Offer to Purchase and Contract that they are getting a conventional loan, can they switch to a VA loan after the contract is signed by all parties?  Would the contract need to be amended?  If the seller does not allow a VA appraiser into their home because they do not want to agree to the buyers switching to a VA loan, are they in breach of contract?
ANSWER: The loan representation in paragraph 5(a) of the Contract is a statement of the buyer’s intent with respect to financing at the time they make their offer.  If the buyers were acting in good faith and intended to obtain a conventional loan at the time they submitted their offer, it would not be a breach of contract for them to seek a different type of financing after the offer becomes a contract, whether or not the seller agrees.  However, if the buyer seeks VA financing, the buyer’s lender may well require the contract to be amended to add the FHA/VA Financing Addendum (form 2A4-T) to the contract, and the seller would be under no obligation to agree to such an amendment.  If the buyers are able to proceed with VA financing, though, the seller’s refusal to allow a VA appraiser on the property could be characterized as a breach of contract since the Contract permits the buyers during the Due Diligence Period “to conduct all desired tests, appraisals, investigations, examinations and inspections of the Property as Buyer deems appropriate” (see paragraph 4(b)).


NCAR provides articles on legal topics as a member service.  They are general statements of applicable legal and ethical principles for member education only.  They do not constitute legal advice.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.
© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.