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Mortgage Contingency
What Is a Mortgage Contingency?
A mortgage contingency is a clause in a purchase agreement that allows a buyer to withdraw from a home purchase if they are unable to secure financing.
It protects buyers from losing earnest money if a loan is denied.
Why It Matters in a Mortgage
Mortgage contingencies:
- Protect buyer deposits
- Set financing deadlines
- Reduce transaction risk
Without a financing contingency, a buyer who cannot secure a loan may lose their earnest money deposit.
How It Works
- Buyer submits loan application.
- Contingency sets deadline for approval.
- If loan is denied within timeframe, buyer may cancel contract.
Proper documentation is required.
Mortgage Contingency vs. Preapproval
Preapproval → Lender estimate
Contingency → Legal contract protection
They serve different roles.
FAQs About Mortgage Contingencies
Is a mortgage contingency required?
No, but it is common in financed purchases.
Can sellers reject offers with contingencies?
Yes, particularly in competitive markets.
Does preapproval remove the need for a contingency?
No, preapproval is conditional.
Related Terms
