what is a loan contingency

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Way to protect yourself in the agreement

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  • What are loan contingencies and how do they work?

  • Contingencies written into a contract must specify how a contingency will be satisfied or released. The standard loan contingency is one that states that you, as the buyer, are not bound to the contract if you fail to obtain approval for financing by a certain date.

  • What is the purpose of a financing contingency clause?

  • Typically a buyer uses this clause to establish a set period of time to apply for a mortgage and/or close on the loan. Within this clause the buyer will also normally list the type of loan they intend to obtain, their down payment amount, the term of the loan and the interest rate. What is the Purpose of a Financing Contingency?

  • When does a loan contingency become binding?

  • Where there is a loan contingency in the contract, there may be a date after which the contingency expires. If the date passes without the buyer canceling the contract based on the contingency, the contract becomes binding.

  • Can a loan contingency be removed from a contract?

  • In most states, removing the loan contingency means that it simply doesn鈥檛 go into the initial contract with the seller. Where there is a loan contingency in the contract, there may be a date after which the contingency expires. If the date passes without the buyer canceling the contract based on the contingency, the contract becomes binding.

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