MortgageĀ Contingency: Vital Updated 2023 Guide


Unraveling Mortgage Contingencies

In the world of real estate, the term mortgage contingency often pops up. But, what is a mortgage contingency, and why is it important for homebuyers and sellers alike?

A mortgage contingency is a contractual clause that provides protection for the buyer in case they cannot secure a mortgage. This clause is typically included in a real estate purchase contract and allows the buyer to back out of the agreement without facing penalties or losing their earnest money deposit if they fail to obtain financing.

Mortgage contingencies are essential because they offer an added layer of security for both parties involved in the transaction. The buyer has the assurance that they won’t lose their deposit if they can’t secure a loan, while the seller can be confident that the buyer is genuinely committed to the purchase.

To better understand mortgage contingencies, let’s explore their different types, the pros and cons of waiving them, and their significance in various scenarios.

Types of Mortgage Contingencies

Mortgage contingencies can be categorized into several types, including:

  1. Financing Contingency: This is the most common type of mortgage contingency, which stipulates that the buyer must secure a mortgage within a specified time frame. If they cannot, they can walk away from the deal without any penalties.
  2. Appraisal Contingency: An appraisal contingency is closely related to mortgage contingencies, as it protects the buyer if the property’s appraised value is lower than the agreed-upon purchase price. In this case, the buyer can renegotiate the price or back out of the contract.
  3. Mortgage Commitment Contingency: This type of contingency requires the lender to provide a mortgage commitment letter to the buyer, confirming that the loan is approved, subject to certain conditions.
  4. Sale Contingent Mortgage: This contingency is used when the buyer’s ability to purchase a new property is contingent on the sale of their current home.

Each of these contingencies offers varying levels of protection for the buyer and ensures that they can proceed with confidence in their home purchase.

What Is A Mortgage Contingency?

Pros and Cons of Waiving Mortgage Contingencies

In a competitive real estate market, buyers may consider waiving mortgage contingencies to make their offer more appealing to the seller. However, this decision comes with certain risks and benefits.


  • Waiving the mortgage contingency can make a buyer’s offer more competitive, especially in a seller’s market.
  • It may increase the chances of the seller accepting the buyer’s offer, as it shows a strong commitment to the purchase.


  • Waiving a mortgage contingency can put the buyer at risk of losing their earnest money deposit if they are unable to secure a mortgage.
  • The buyer may face legal and financial consequences if they cannot complete the purchase without financing.

Before deciding to waive a mortgage contingency, buyers should carefully weigh the pros and cons and consult with a professional, such as a real estate agent or an attorney, to understand the potential risks involved.

Expanding Your Mortgage Knowledge with Mortgage Rater

Mortgage contingencies are just one aspect of the home buying process. To empower yourself with a comprehensive understanding of mortgage-related terms and concepts, visit our Mortgage Terms page. This valuable resource covers a wide range of topics, from adjustable-rate mortgages to zero down payment mortgages, and everything in between.

By familiarizing yourself with various mortgage terms, you’ll be better prepared to navigate the complexities of the home buying process and make well-informed decisions. With Mortgage Rater as your go-to resource for mortgage information, you can confidently embark on your journey to homeownership.

Don’t forget, when you’re ready to take the next step, apply for a loan with Mortgage Rater and let our team of experts guide you through the process, ensuring you have the best possible experience while securing your dream home.

Mortgage Contingencies

The Mortgage Contingency Timeline

A crucial aspect of mortgage contingencies is the mortgage contingency date. This date is agreed upon by both parties and represents the deadline by which the buyer must secure a mortgage.

Mortgage contingency dates can range from 30 to 60 days, depending on factors such as the type of loan, the complexity of the transaction, and the buyer’s financial situation. It’s essential for the buyer to work closely with their loan officer to ensure they meet the mortgage contingency date requirements.

The mortgage contingency date is separate from the closing date, which is the date when the property is legally transferred from the seller to the buyer. While the mortgage contingency date focuses on securing financing, the closing date encompasses the completion of all contractual obligations.

Mortgage Contingencies in New York

In some regions, such as New York, mortgage contingency clauses are more common and carry unique stipulations. The mortgage contingency clause in New York typically includes the following components:

  • A specific mortgage amount and interest rate that the buyer must obtain.
  • A deadline for securing a mortgage commitment.
  • The buyer’s obligation to make a “diligent and continuous effort” to obtain a mortgage.
  • A requirement for the buyer to promptly notify the seller if they cannot obtain a mortgage commitment within the specified time frame.

To navigate these complex clauses, buyers and sellers should consult with a knowledgeable real estate attorney or agent familiar with local laws and practices.

What Are Mortgage Contingencies

Statistical Insights and Government Resources

To help you understand the mortgage landscape and make informed decisions, here are some statistical insights and government resources:

  1. According to the Federal Reserve’s Survey of Consumer Finances, the homeownership rate in the United States was 64.6% in 2019.
  2. The Consumer Financial Protection Bureau (CFPB) is a valuable resource for understanding your rights and responsibilities as a mortgage borrower.
  3. The U.S. Department of Housing and Urban Development (HUD) offers various resources and programs to help potential homebuyers, including information on FHA loans and other government-backed mortgages.
  4. The Federal Housing Finance Agency (FHFA) regulates Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System, playing a critical role in the U.S. mortgage market.

By leveraging these resources, you can gain a better understanding of the mortgage process and make informed decisions when dealing with mortgage contingencies.

Navigating Mortgage Contingencies with Mortgage Rater

Understanding mortgage contingencies and their implications is crucial for both buyers and sellers. At Mortgage Rater, we’re committed to helping you make informed decisions throughout your home-buying journey.

Ready to take the next step? Apply for a loan with Mortgage Rater and let our team of experts guide you through the process, ensuring you have the best possible experience while securing your dream home.

Donavon Warren

Donavon Warren

Donavon Warren is a seasoned finance professional with over 20 years of experience. Before embarking into the mortgage industry Donavon attended UCLA. He is the owner of Mortgage Rater, a leading mortgage finance company that offers a range of informational services to clients across the United States. As a finance and mortgage author, Donavon brings his wealth of knowledge and experience to the platform, writing about various topics related to personal finance, investments, home loans, FHA loans, VA loans, 30 Year Fixed rates, no-interest loans, mortgages and more. With his insights and expertise, he aims to educate and empower readers to make informed financial decisions that can help them achieve their financial and mortgage goals. NMLS#2470202
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