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Knowledge Base->Mortgage Lender->What is mortgage contingency

      A "mortgage contingency" is a provision in the home purchase and sale agreement that says: if the prospective buyer can’t get a mortgage within a fixed period of time, she/he can call the whole deal off. In other words, the agreement is conditional depending on the buyer being able to obtain a mortgage on the property. It usually lasts for 30 to 60 days, depending on the average time needed to obtain a loan commitment.MortgageLender103.gif
      A mortgage-contingency rider provides critical protection to the buyer. For example, it allows the buyer to void the purchase contract without penalty in those cases: The buyer is unable to obtain mortgage in the time period specified in the contract after making a reasonable or good faith effort to do so within the time provided. Due to the reality of current downturn real estate market, almost all sellers require buyers obtain "pre-Approval" letter from a lender, which gives the seller a degree of confidence that the buyer not going to void the contract unless some extraordinary circumstance arises.
      The seller may refuse to a mortgage-contingency agreement. This can and does happen in a very hot seller's market. In these cases, there is not much the buyer can do. But the absence of a mortgage-contingency rider might mean that the buyer will be forced to finance his or her home purchase. Otherwise he/she will lose deposit. Because of this risk, buyers should be cautious about signing a purchase and sale agreement not containing this clause.

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