Who needs a mortgage contingency?

On Behalf of | Aug 5, 2020 | Real Estate Transactions |

Real estate purchase agreements contain a lot of information. Those who fail to read them in full may end up losing money if they are not careful and their purchase fails to go through.  With a lot on the line, Louisiana residents will want to make sure they understand the terms of their purchasing agreements and be sure they offer the appropriate buyer protections — such as a mortgage contingency if one needs financing to purchase the property.

All real estate contracts include contingencies of some form. These are simply conditions that must be met for a sale to go through. A mortgage contingency is common in most purchasing agreements. It simply states that a buyer can back out of the deal without penalty if he or she fails to obtain the funding needed to purchase the property.  This contingency clause can be very detailed, often including information about the type of loan one wants, acceptable interest rate and points, the amount one is looking to finance and the time frame for which one has to secure the funding.

Without a mortgage contingency, one may lose any earnest money put down, as well as have to pay the seller a fee to get out of the contract. It can end up being a significant financial loss, so it is worth making sure this contingency is included and has acceptable terms if needing to take out a mortgage loan. If obtaining financing is not an issue because one is paying cash, has already been preapproved for funding or the seller is financing, then waiving this contingency can typically be done without issue.

A mortgage contingency is just one of many parts of a purchasing agreement. Those who are not familiar with writing these contracts or the language used in them may end up with terms that do no serve their best interests. With the assistance of legal counsel, homebuyers in Louisiana can make sure their real estate contracts are properly drafted and include all desired protections.