What Is Financing Contingency?
Financing Contingency: A contract clause that lets you cancel and keep your deposit if your mortgage isn't approved.
Also called: mortgage contingency, loan contingency
A financing contingency, also called a mortgage or loan contingency, lets you cancel the purchase and get your earnest money back if you can't get the loan described in the contract by a set date.
What it usually specifies
- Loan type, such as conventional, FHA or VA
- Loan amount or loan-to-value
- Sometimes a maximum interest rate
- The deadline, often 21 to 30 days after ratification
When to remove it
Don't remove it until you have a conditional approval with only routine conditions left, or a clear to close. If underwriting is behind schedule, ask the seller for a written extension.
Good to know
Waiving the financing contingency means that if the loan falls through, you could lose your earnest money.