Jumat, 17 September 2010

Mortgage Contingency

Most of us aren't paying cash for our homes these days.   We need to secure a mortgage from a lender.    In order to secure the mortgage, you must have a purchase and sales agreement on a home.    For that reason, we have come to accept  a "mortgage contingency clause" as reasonable part of the purchase agreement.   

What exactly does this mean?  

The mortgage contingency clause protects the Buyer's deposit while the Lender researches the Buyer's qualifications and the home's value supported by an appraisal.   This process can take a few weeks.   Normally, during this time the home is "off the market."   

After review, the Lender will either issue a "commitment" or a "denial"....

The commitment, formal and in writing, means both Buyer and Seller can breathe easy and  can move ahead with the purchase of the home..... 

If one receives a "denial", the Buyer MUST provide a "letter of denial" from the Lender, and then ask for a release of his funds.  The home goes back up for sale.

Because of the mortgage contingency clause, most Buyer's will seek out a "pre-approval" from a lender prior to offering on a home.     This way they know in advance that they are likely to secure financing and exactly what their purchasing power is...  and, the Savy Seller will request to see a "pre-approval" on the Buyer before accepting an offer on their home; taking it off the market while the formal process works itself out.

This "pre-approval" process is the reason we don't see that many denials. 

Need a lender referral or help with purchasing a home?       cal@alandcal.com

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