should you have a loan contingency removal as part the offer for a property?

Asked by Barb, 92336 Wed Jul 1, 2009

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Steven Fong, Agent, Fremont, CA
Sat Apr 24, 2010
In the Purchase Agreement there is a standard loan contingency period of 17 days. (This can be modified depending on how fast your lender can provide underwriting approval) Like the others have said, unless it is an all cash purchase, that contingency period is there to protect you from liquidated damages if the loan does not go through during that time. Therefore, keep the loan contingency.

-Steven Michael Fong
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1 vote
Deborah Cama…, Agent, Riverdale, NY
Wed Jul 1, 2009
Dear Barb,
OMG NO!!!!! Never, ever, never, remove your mortgage loan contingency completely from the contract!
Now that hopefully I have your attention, here's why:

Even if you have obtained your Mortage Commitment in advance (a very smart thing to do) and there are very limited conditions to be cleared before closing there are other considerations. What if.... you lose your job, the lender goes out of business, etc. etc.? Any good attorney will tell you the same thing. The last thing you want is to get involved in litigation to get your downpayment returned if your financing falls through. So, if you insist on making your offer more enticing to the seller, which I assume is why you would want to do this in the first place, there is conservative way to accomplish this. I saw an attorney protect a buyer's best interests by waiving the contingecy period at the time of signing contract but attaching a copy of the Mortgage Commitment that the contract then became subject to. That way, if the buyer's worst nightmare came true such as job loss or the lender going under, they were fully protected.

Good luck with your transaction and keep asking good questions!
Regards,
Deborah Endres Camacho
...For all your real estate needs
NMLS Mortgage Originator 20+ years of experience
MORTGAGE ACCESS CORP.
National Direct Lender with HQ in Morris Plains, NJ

Phone: 914-629-5661
Email: DCamacho@moacc.com
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0 votes
Steven Ornel…, Agent, Fremont, CA
Wed Jul 1, 2009
Hi Barb, unless you are paying in cash, you should absolutely have a loan contingency period! Depending on your circumstances there is also an option to have a loan contingency that remains until the loan is funded. Discuss this subject with your Realtor, and don't be afraid to keep asking "why?" until you are satisfied that you understand and agree with whatever is being proposed.

Best, Steve
0 votes
Dave Heck, , Arcadia, CA
Wed Jul 1, 2009
Unless you are putting down a lot of cash or paying all cash, a loan contingency in your purchase offer is a very important part. the credit markets are so tight these days, that even people who are pre-approved for a loan sometimes can't get financing for one reason or another. You need the loan contingency to protetct your earnest money deposit.
0 votes
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