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 a loan contingency clause when buying a house?
Having a loan contingency clause in a home sales contract means that if anything goes wrong in the loan approval process, the buyer is freed from the obligation to purchase the home. If the buyer can’t obtain a mortgage that meets these conditions, they’re protected from having to pay back a loan they can’t afford. Click to see full answer.
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.
What happens when a loan contingency is removed?
The buyer could lose their earnest money and leave themselves open to a lawsuit by the seller if the contingency simply expires. The buyer might still want to purchase the house after an active loan contingency has been removed. They might continue to try to secure financing for the purchase.