Do I Need A Mortgage Contingency?
As the old saying goes ‘cash is king.’ Surely if you can deliver a big bank check at closing, or a suitcase full of hundreds, a seller is going to look at your offer favorably. For most consumers, however, a mortgage will be necessary for financing their American dream. A buyer has the option of inserting a mortgage contingency clause into their offer to purchase. As discussed in my previous post, the fewer contingencies in an offer to purchase, the more likely it is that the transaction will close. This is important to sellers who may be presented with multiple offers and must select the one that gives them the most assurance they have a done deal.
Waiving a mortgage contingency will certainly make your offer attractive, and may be tempting, but is not for the faint of heart. If the buyer intends to take out a mortgage on the property to pay for their new home, the mortgage contingency will allow them to cancel the transaction and walk away with their deposit funds if the mortgage is not approved.
A mortgage may be denied for a myriad of reasons. Some of these include a property appraising below the purchase price, a change in the buyer’s employment or finances, non-compliance of the property with pertinent laws and regulations or a change in the buyer’s credit score between the time of application and closing. Waiving a mortgage contingency removes all lines of defense in support of receiving your deposit back based on a failed mortgage application.
If you are considering waiving your mortgage contingency, it is important to discuss all aspects of the transaction, including your finances and the property, with your attorney, realtor and mortgage professional.
Posted In: Real Estate