Newsflash: First Time Homebuyer in a pickle, Please help (Kentucky)

This is for a friend who is not on reddit:
I signed a standard P&S on my first home with my husband subject to FHA financing. The home price was slightly outside our comfort zone but we thought we could make it work, but when we got our financing disclosure the payment was higher than expected and higher than the payment estimated during preapproval and so I cancelled based on financing contingency. My realtor said the seller is going to sue me for cancelling and that I could have gotten a better rate and better financing if I tried. (I did try with two different mortgage brokers and this was the best I got offered). The payment is more than half my take home income. I asked the lender for a failed financing letter but he said he cannot give me one since I did qualify. I am terrified I am going to be sued but I know in my heart that the house with the financing offered is too much for our budget. The seller is FSBO and he was buying another home contingent on this one selling and he is claiming I am causing him all kinds of extra expenses. I don’t care if I lose my $500 earnest money but I cannot stand the stress of being sued, I mean, we just saved up enough for a small downpayment. My realtor gave me the sellers number and suggested I work it out on my own or get a lawyer. What should I do?


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