WHEN IS A FINANCING CONTINGENCY USED?
You need a financing contingency if you are obtaining a loan for your home purchase and cannot afford to purchase it in cash if the loan falls through. This contingency is meant to allow you to finalize your loan. It is the most common contingency.
WHY IS IT BENEFICIAL?
The financing contingency allows you to void the sales contract if you are rejected for the loan. However, very few contracts fall apart due to this contingency since most listing agents and sellers only accept contracts where the buyers are pre-approved with a lender. We generally recommend a financing contingency if you are unable to pay cash for the purchase, but it is especially a good idea if you are worried about possibly losing your job or if your financial situation might change before you go to settlement. You want to be sure you are protected.
HOW DOES THE CONTINGENCY WORK?
A typical financing contingency can range from around 14 days on the lower end all the way up to closing, depending on the situation. Most frequently, we see financing contingencies in the 25-30 day range. The contingency can be set to automatically expire at the deadline or not have an expiration date. The purchaser can either remove the contingency, decide to move forward to settlement without the protection of the financing contingency, or provide notice voiding the contract.
WANT MORE INFO?
Chat with your lender and your Realtor for a more detailed discussion of the contingency. We’re here to help!