Are you in the process of buying a home and wondering whether or not you should waive a loan contingency? In this article, we’ll explain what a loan contingency is and discuss if you should waive a loan contingency when buying a home.
What is a loan contingency?
A loan contingency is a condition in your purchase contract that states your offer is contingent on you obtaining financing. This means that if you cannot secure a loan, you can back out of the deal without losing your earnest money deposit. Furthermore, it provides invaluable protection for the buyer by allowing them to back out of an agreement should their loan criteria not be met.
Why waive a loan contingency?
Waiving a loan contingency can make your offer more attractive to a seller. This is especially true in a bidding war for a property. To mitigate risks, buyers need to ensure that their lender provides a commitment that makes the waiver of their loan contingency clause prudent. Additionally, seeking the guidance of a real estate agent early on in the process can help protect buyers.
The risks of waiving a loan contingency
If a buyer is unable to obtain financing after waiving their loan contingency, they may lose their earnest money deposit. Additionally, they could face penalties from the contract. This risk should not be taken lightly, and buyers should thoroughly understand the terms of their contract before waiving any contingencies.
The rewards of waiving a loan contingency
In markets where interest rates are low and competition from other buyers is high, waiving a loan contingency could give you an edge over other offers. However, it’s important to carefully consider the potential risks and rewards before making a decision. Consult with a trusted financial advisor or real estate professional to help make an informed choice. Furthermore, you should make certain you are approved for financing before waiving a loan contingency.
In conclusion, a loan contingency is an important protection for buyers in any real estate transaction. While waiving it can have potential benefits, buyers should thoroughly understand the risks involved before making a decision. By doing so, they can make informed choices about their home purchase and avoid costly mistakes.
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Richard has extensive experience in all aspects of buying and selling residential property. He has sold more than 400 homes and well over $100 million in residential real estate. There’s no need to guess. Get expert advice that will allow you to buy and sell with confidence and ease.
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