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FHA Loans: Can I Change the Terms of Sale Agreement?

January 12, 2012

The FHA provides many helpful resources for homebuyers on its official site at FHA.gov. One of those resources is an online version of a HUD/RESPA booklet called “Buying Your Home” which includes a section on settlement costs.

One of the first portions of this booklet a prospective FHA mortgage loan applicant will read includes the following:

“The real estate broker probably will give you a preprinted form of agreement of sale. You may make changes or additions to the form agreement, but the seller must agree to every change you make. You should also agree with the seller on when you will move in and what appliances and personal property will be sold with the home.”

The second sentence contains a revelation for some borrowers–some loan applicants simply assume that a pre-printed form like the agreement of sale is an iron-clad, unchangeable document which must be accepted as part of the deal. But the borrower should consider making reasonable changes to this document that, if agreed upon by both buyer and seller, can protect the borrower’s interests as well as the seller’s.

For example, does the paperwork include a “mortgage clause”? The FHA instructs home buyers, “The agreement of sale should provide that your deposit will be refunded if the sale has to be canceled because you are unable to get a mortgage loan. For example, your agreement of sale could allow the purchase to be canceled if you cannot obtain mortgage financing at an interest rate at or below a rate you specify in the agreement.”

If your terms of sale agreement does not include such a clause, don’t sign until you and the seller can come up with a new agreement that does include one. Don’t sign a legally binding document based on the promise that a new, revised one will be drawn up later on–your signature binds you to the specific terms stated in that particular document. Protect your interests by insisting that the new terms of sale include a mortgage clause and other reasonable protections that are customary when buying and selling a home.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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