Home Buying in San Francisco>Question Details

Shad Smith, Home Buyer in Palo Alto, CA

Is 17 days enough for loan contingency removal, for FHA loan? If not, what contingency period is recommended?

Asked by Shad Smith, Palo Alto, CA Sat Jul 23, 2011

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In this day and age of lending, contingency removal should only be done at funding. Yes I know people will say that is ridiculous, but that should be the goal of every agent that negotiates on behalf of their client. 17 days is enough barring any issues with the file, but you really should reconsider signing anything that does not give you an out until you fund.
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2 votes Thank Flag Link Sat Jul 23, 2011
Anything can go wrong, even after you sign your loan docs. There is no guarantee your loan will fund until it funds. Simple as that.
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0 votes Thank Flag Link Wed Aug 3, 2011
Shad, My company and I work on a guaranteed 7 days clear to close so 17 days sounds fine to me. My goal is to get docs to the escrow company as soon as possible so everyone can relax and enjoy the process. Stretching out the financing contingency to 30 days just results in more agony for all concerned. As @Ron stated, you should already be preapproved before you find the property (I do not work with prequals, everything is verified and underwritten upfront) so clearance of title and appraisal are all I need once a purchase contract is signed.
0 votes Thank Flag Link Wed Aug 3, 2011
I would ask for at least 30 days. Your lender could give you a better idea of time frame needed. I have seen lenders close FHA in as little as 21 days. But best to ask your lender before writing your contract offer.
0 votes Thank Flag Link Wed Aug 3, 2011
That sounds short to me but your lender should be able to answer that one. You are the buyer? Talk to your lender.
0 votes Thank Flag Link Wed Aug 3, 2011

It depends in large part upon what type of property you are buying. If it's a condo, if the project isn't already FHA approved that can take a long time. Whether condo or not, 17 days is tight - talk with your lender, they will give you the correct timelines.

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
0 votes Thank Flag Link Wed Aug 3, 2011
Understand that 17 days is not what is allotted to find a Lender, fill out and Application, negotiate the terms and get a binder. You should have done most of that before you ever made and offer:

When you have settled on a House; the Lender plugs that house into the equation and gives you a GFE with applicable numbers. If you agree, then the Lender gives you a committment which you take to the Escrow Company and release the Loan Contingency.

Got it?

God bless
0 votes Thank Flag Link Thu Jul 28, 2011
Shad - good question. Of course the real answer is "it depends". While every situation is different and the CAR purchase agreement uses this as a default (17 days) if no box is checked... You need relaly look at this in a competitive offer situation and yet better make sure your ducks are in a row then. Or, you should look to get additional flexibility because your situation may call for more info.

Our company does a tremendous amount of FHA business so our systems are set up to work along the same timeline as the transaction.

Good luck in your purchase and if I can be of further help, please just let me know.
0 votes Thank Flag Link Thu Jul 28, 2011
Shad--I strongly recommend, based on recent experience, that you give yourself 30 days for the financing/appraisal contingency removal timeframes when dealing with an FHA loan. Lenders are more scrutinizing these days, and sometimes underwriters can suddenly request more docs from the buyer or have an issue with something that will require more time for approval.

Good luck!

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0 votes Thank Flag Link Wed Jul 27, 2011
You may change the contract's working. How about in an Addendum, "The financing contingency shall be removed within 30 days of acceptance"? If you are sure about obtaining the loan, but not about the timing, 30 days should give you enough time; and, it may keep the seller happy because if you get final approval sooner, all for the better.
0 votes Thank Flag Link Sat Jul 23, 2011
Shad, if you have provided all your documentation to your lender and are truly pre-approved, it shouldn't be a problem. What I mean by that is that you have given your lender your past two years tax returns, two months bank statements, your last two pay stubs and they have verified your funds and ran your credit.

Wells Fargo can usually remove the loan contingency in 14 days, where B of A is usually 17-21 days.

I agree, it's best to be safe than sorry when it comes to waiting until your loan funds to remove your loan contingency and that sounds all great and rosey, but it's not the real world when you are purchasing here locally.

I don't think you will be competitive or have much leverage when making offers if you were to ask for a loan contingency until the close of escrow. Maybe it's different for the agents who are out of state or in different counties, but not not here on the Peninsula.

Lastly, talk with your loan professional and see what they have to say. That's who you need to be listen to. Also, make sure to have a paper trail and ask your questions via email and when it comes time for you to remove your loan contingency, ask your lender to put it in writing.

If you have any questions or need a referral, feel free to ask.

0 votes Thank Flag Link Sat Jul 23, 2011
I agree Gregorio - in many other states in the U.S. financing contingencies stay on until much longer than 17 days, not sure why California has stuck to 17 days as the standard.

If a loan contingency is being removed it should mean the loan is clear to close.
0 votes Thank Flag Link Sat Jul 23, 2011
It depends on your lender, I know lenders that can close in 14 days.
0 votes Thank Flag Link Sat Jul 23, 2011
In my area we usually give 30 days for the buyer to obtain a firm commitment.

This doesn't mean it can't be done in less time, if there is an urgent need but this is a typical (and reasonble) time frame we use in our contracts.
0 votes Thank Flag Link Sat Jul 23, 2011
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