the buyer actually has the money or the mortgage before you get to the
closing table.
A mortgage or financing contingency gives the buyer a certain number of days
in which to obtain a commitment from a mortgage company, for a stated amount, for stated interest,
and for a stated term of years.
For example, a mortgage for:
80% of the purchase price, with
An interest rate of 6.5%, for
An amortization period of 30 years.
KEYS:
You want the amount of the loan contingency to be as low as possible.
The more the buyer has to put down, the greater the likelihood of he or she getting a mortgage.
You want the stated interest rate to be as high as possible. The higher
the rate is in the contingency, the more likely it is the buyer will be able to get that loan.
Do not worry about the length of your buyer's mortgage. The amortization term is more of a
concern to the buyer than you.
If the buyer cannot get a loan within the time stated or fails to meet any of the other
requirements, you may, if included in your contract, have the right to try to get a loan for her.
If neither you nor the buyer can get a loan for the agreed-to amount and terms, then you must
return the earnest money and the contract is null and void.
This is the first in an ongoing series on common real estate contract contingencies.
see Real Estate Contract ABC's - The Basics.
