What Is A Loan Contingency?
We get a lot of questions about Real Estate in Santa Clarita. This week we’re answering your question what is a loan contingency?
A: Contracts for purchasing a home commonly include a loan contingency. There are certain requirements and conditions that must be met for the buyer to proceed with the sale. Contingencies allow you to walk away from an agreement without penalty. If you put down an earnest deposit when you submit your offer, the contingency clause can entitle you to a full refund upon contract cancellation.
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. This contingency is typically 21 days but can be negotiated for lesser or greater amounts of time. When you are pre-approved for a mortgage, the lender has qualified you for the loan based on your credit report, debt-to-income ratio and analysis of your financial situation. Major changes to your credit, debt, or assets after pre-approval can jeopardize your chances of getting the mortgage. The house must also meet certain requirements before the mortgage loan is approved. If you have submitted your earnest money deposit (EMD) but the conditions are not satisfied, the deposit is usually refunded and the house goes back on the market.
If you are considering buying a home, it is important to hire a licensed, experienced, professional. Be sure to connect with us here, or at 661-505-1051 for all your real estate needs.