help-somen=body suing me for breaching contract to purchase a

I need help.
I got a small claim cout letter and said somebody is suing me becuase I breach the contract to purchase his house.

The story is that I had a financial letter to approve I have under $700,000.00 buying power. The signed purchase is $70,5000.00. Before signing the contract, he told me we could get interest rate as low as 4.35% from a local bank. He told me the bank name. The sceond day after signed the contract to purchase, I checked the bank he mentioned and other banks, the rate is much higher and we are going to hit jumb loan which is $417,000.00 and which would result much higher monthly payments. So I called him and emailed him we can't get the reasonable rate and consern that we can't afford to buy the house. He said letting me email him the reason and he will refund the deposit check which is $1000.00. SO I did email him the reason and told him that due to financial reason and jumb loan, we like to cancel the contract and asked him to send me the check back. Then he said he can't return my check since I breach the contract. So I called my bank to stop the check(I think I did worng here). Now I got the letter from the small claim court for his suing me.

What I should do now? Thanks for your great help.