Definition
A contractual condition that protects the buyer by allowing them to withdraw from the purchase if they cannot secure mortgage financing at agreed-upon terms. If the buyer cannot obtain the loan, the earnest money is typically returned.
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Find my pathAbout this term
The financing contingency is a crucial protection for buyers who depend on mortgage loans to complete their purchase. It typically includes specific loan terms such as maximum interest rate, loan amount, and down payment percentage. The buyer must apply for and diligently pursue financing, and the seller can set a deadline for the financing contingency to be satisfied or removed from the agreement.
Pro Tip
Get pre-approved for financing before making an offer to strengthen your offer and reduce contingency period.
Example
The financing contingency required the buyer to obtain a 30-year fixed mortgage at no more than 7% interest with 20% down.