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There are several contingencies in a standard Real Estate Purchase Agreement. One of the main contingencies is the loan contingency. Basically, the buyer will specify the terms of the purchase on the first page of the purchase agreement, including the loan amount, as well as the terms of the financing the buyer is attempting to obtain. The intention is for the transaction to be contingent upon the buyer’s ability to obtain financing at the rate and terms indicated in the purchase agreement
, as well as the loan amount. So why does it matter?
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- Image by thinkpanama via Flickr
Comment posted by Rodil San Mateo
on March 5, 2010 at 6:51 pm
Great article on how the Loan Contingency protects both the home buyer and the home seller (it prevents the buyer from keeping the escrow open when they can’t get financing for the purchase).
A good Mortgage Pre-Approval Letter should also state that the Mortgage Officer has ordered and analyzed the borrowers credit report (not just one provided by the buyers), and examined their income and financial documents. This shows the Mortgage Officer has verified that the home buyer has enough income to afford the mortgage and has enough funds to to cover the closing costs.
Comment posted by admin
on March 5, 2010 at 9:56 pm
Rodil a good pre-qualification or pre-approval letter should always contain a statement that the loan officer has reviewed the buyer’s credit reports. It may also indicate that the loan officer has reviewed the buyer’s assets, but there is a separate contingency in the contract that gives the buyer a set number of days to provide verification of funds to close. This can be satisfied either by providing bank and asset statements, or by having the lender issue a statement that the buyer’s funds to purchase have been verified