How to deal with mother in law destroying family?

My husband and I have been married for 13 years and have had our trials and errors. 6 years ago we had a home forclosed on. We never came to her for help, we have never asked her for a single thing. Last month she came to us, and offered to buy a home that we all would live at. (making her a full apartment on property). We went and looked at houses, and decided upon one and she put the bid in, This morning she calls the agent and withdrawls her offer, stating that we were not capable of paying and were irresponcible.(We have not had issues since the forclosure) She had our children excited about getting a new home and everything, now they and I sit crying because we have no recourse, no home, and out money that we withdrew from 401 k for the down payment and all. She literally tore the heart from our family. How do I deal, I want to yell, Kick and scream, take the grandkids from her forever.