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Waiving the Mortgage Contingency

Most real estate contracts include contingency clauses. These are statements indicating the sale is conditional on something else happening. One of the most common contingencies is for a mortgage. The mortgage contingency will specify a mutually agreed upon amount of time during which the buyer will apply for financing and the loan will be underwritten. In a competitive market, buyers may choose to waive some contingencies, including the financing contingency, to make an offer more appealing to the seller.

Alex Monticello explains below why it is beneficial to waive the mortgage contingency.

Alex explains, “When we have a client who is eminently qualified, one of the ways we can strengthen the offer, is to waive the mortgage contingency. It allows us to put our offer on par with a cash offer.”

Waiving contingencies can present more risk than a buyer cares to take on. If you waive the financing contingency and your lender doesn’t approve your loan for the price of the home, you have to make up the difference in cash or walk away and lose your earnest money deposit – or more if the sellers decide to sue.

Alex says, “For some buyers the mortgage contingency is important and it provides an extra layer of protection. But for a buyer who is eminently qualified, we’ve found that waiving the mortgage contingency can put their offer on par with a cash offer and increase the chances that they ultimately prevail in a multiple offer situation.”

If you choose to waive the mortgage contingency you can minimize the risk in the following ways:

  • Have a long talk with your loan officer. Make sure you have a very clear picture of your finances, including your credit score.
  • Have enough money in reserve. If your credit score dips or you deplete your cash assets between the time you apply for the loan and your closing, that’s enough to get you rejected for a loan.
  • Do not go buy a car. Or a boat. Or furniture. Do not charge anything until closing – and definitely don’t open up a new credit card. These things will all cause your debt to change and you could risk not getting a mortgage.
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