What are my options?

I'm John Rankin and I live in New York State, Rockland County. When my landlord offered to sell me the 2 family home where me and my family reside I had to refuse as I live hand to mouth, week to week. When he offered to lend me and my wife the downpayment for the home, 36 months @ 8.25%, we went ahead and started looking for a bank. 3 months later we have been preapproved for a 95% mortgage and are ready to move on to the next step when the landlord backs out on us on advice from his lawyer. I feel hurt and betrayed. He knew the only way I could afford the house was to borrow the down from him, no one else I know can lend it, and he never set any conditions on it. Nothing is in writing and I just want to bash him in the head. Do I have any leagle recourse to threaten him with? I just want to buy the house, not get into a leagle battle. If anyone has any ideas I would truly appreciite it. Thank you.
JSR III

Though it would be hard to prove that there was any verbal agreement, you could consider suing for "Breach of Verbal Contract" and ask for "Specific Performance". This would basically mean that you would have to convince a court that there was a verbal agreement, that it was breached, and that the courts should order that the landlord comply with his agreement.

However, this will be VERY hard to prove (and the chance of success are so slim that you probably won't find an attorney willing to consider contingency). This means you would have to pay as you go.

You might try to bolster your case by writing the landlord a letter, sent Certified RRR. In the letter, reiterate the details of our agreement (dates, terms, etc.) and close the letter with something like... "If you don't agree that we had a verbal agreement for this loan, please contact me in writing within X days with your understanding of this agreement." The worse he will do is deny your recollection which leaves you right where you are today... and he might either agree or ignore your letter, which can be used to help you.

Finally, you have another issue that you didn't address...
that being the mortgage. Most, if not all, mortgage lenders do NOT allow the down payment to be 'borrowed money'. This is because, upon purchase, you will have NONE of 'your' money involved to secure your intent to pay.