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Everything You Need to Know About Mortgage Contingency

Posted by Anthony Serra | Apr 23, 2024 | 0 Comments

In the intricate dynamics of residential real estate transactions, the mortgage contingency serves as a crucial safety net for both buyers and sellers, ensuring that financing is secure before the deal is sealed. This contingency clause protects the buyer by providing them with an opportunity to secure a mortgage loan approval within a specified timeframe, typically around 30 to 45 days after the offer is accepted.

When a buyer makes an offer on a property, they include a mortgage contingency clause in the contract. This contingency stipulates that the purchase is contingent upon the buyer securing financing from a mortgage lender. During the designated period, the buyer must diligently pursue mortgage approval, submitting necessary documentation and working closely with their lender to finalize the loan terms.

If, for reasons beyond the buyer's control, the buyer fails to secure financing within the agreed-upon timeframe, they have the option to back out of the deal without facing financial penalties. This protects buyers from being liable for damages if they are unable to close title and gives them an exit strategy if their financing falls through.

On the flip side, the mortgage contingency also provides reassurance to sellers. While it introduces an element of uncertainty into the transaction, it ensures that the buyer has the means to fulfill their end of the bargain. Sellers can proceed with confidence, knowing that the buyer is under a duty to pursue his mortgage with diligence and in good faith,  thus reducing the risk of the deal falling apart due to financing issues.

In essence, the mortgage contingency serves as a vital protection mechanism in residential real estate transactions, offering both buyers and sellers a safety net and promoting smoother, more secure transactions in the dynamic world of real estate.

About the Author

Anthony Serra

Tony Serra is a passionate advocate, especially for the elderly, disabled and those of modest means who need the services of an experienced and caring attorney. For more than 30 years, Tony has been helping common, everyday folks navigate their way through life's turbulent waters. Through innovation and utilizing modern technology, Tony and his law firm are now able to offer quality legal services that at one time were prohibitively expensive, at a fraction of the cost. If you need basic legal services, such as a Will, Power of Attorney, Living Will, Special Needs Trust, real estate transactions, uncontested guardianship pleadings and much more, please visit our website and our SMART LAW legal services platform. You will be pleasantly surprised by what we offer and glad you did! Tony is also an experienced mediator and founder of the Conflict Resolution Center of NJ. Tony has specific training in family matters as well as elder law and contested guardianship and estate cases.  


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