What is a Mortgage Contingency Clause?

Mortgage contingency clauses can be found in most purchase contracts. It is the clause that states if the buyer is unable to get a mortgage loan within a certain period, they can cancel the contract without any penalty fees. Sellers do not have to agree to have mortgage contingency clause in the purchase agreement, they will agree depending on market conditions.

Why It Is Important?

A mortgage-contingency clause provides protection to the buyer. Most agents use this clause to protect their buyers. It gives the buyer a reasonable amount of time to locate financing. If the buyer is unable to secure financing, they are able to cancel and get their initial deposit back without any penalties.

The contingency also protects buyers from getting a loan with unfavorable terms. Most sellers have buyers pre-qualify with a lender before they put in their offer to avoid wasting their time accepting an offer from a buyer that does not qualify. More and more sellers also require that a buyer pre-qualify with a designated and trusted lender.

blog comments powered by Disqus