Mortgage Contingency Date vs. Closing Date: Walking the TimeLine Tightrope
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Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
When buying a house, balancing all the finances and deadlines can feel like walking a tightrope. Your goal is to safely make it to the closing date without the deal falling through. But sometimes, a contingency safety net you’ve included in your offer can actually shake the wire during the final stretch.
In this guide, we’ll break down the mortgage contingency date vs. the closing date, and how contingencies can impact your journey to homeownership.
We’ll also share tips for a smooth transaction, what you need to do before the big day, and how you can avoid unexpected hurdles.
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What is a mortgage contingency in a purchase offer?
A mortgage contingency in a purchase offer is a pivotal clause for both buyers and sellers in a real estate transaction. It gives you, the buyer, a set period to secure a mortgage loan. If you’re unable to obtain financing within this timeframe, the contingency allows you to back out of the deal without losing your earnest money.
This contingency is particularly important if your ability to purchase the home hinges on getting a mortgage. It’s a layer of protection that ensures you’re not legally bound to buy a property if your financing falls through.
The specific terms, like the duration and conditions of the mortgage contingency, are negotiable and vary depending on the agreement between the buyer and seller. The contingent period usually lasts between 30 to 60 days from the date you signed the purchase agreement.
How does a mortgage contingency work?
A mortgage contingency works as a safety net in your home purchase agreement. Here’s a short example to illustrate its function:
You obtain your financing: Imagine you’re buying a home and have included a mortgage contingency in your purchase offer. This contingency states that you must secure a mortgage approval by a certain date — let’s say 45 days from the date of the agreement. During these 45 days, you’ll apply for and work toward obtaining a mortgage loan. If you receive mortgage approval within this period, the deal proceeds as planned.
Your financing falls through: If you’re unable to secure a mortgage within these 45 days, the contingency comes into play. You can opt to request an extension from the seller, renegotiate the terms, or back out of the purchase without penalty. This means you won’t lose your earnest money deposit, which is a significant amount put down when the offer is made.
As a buyer, you can request an extension to the mortgage contingency deadline, but the seller is under no obligation to grant you the additional time.
Mortgage contingency date vs. closing date
Let’s unpack the mortgage contingency date vs. the closing date and how these milestone deadlines play a role in your home purchase journey.
Mortgage contingency date
What the mortgage contingency date represents: This date marks the deadline by which you must secure mortgage approval, not just mortgage prequalification. It’s a critical checkpoint in the homebuying process, ensuring you’re not legally bound to purchase without confirmed financing.
What needs to happen by that date: By this date, you should have received a mortgage approval from a lender. This involves completing your mortgage application, submitting necessary documents, and working closely with your lender for approval.
What happens after you fulfill the contingency: Once you’ve secured a mortgage, the purchase can move forward, bringing you closer to homeownership. The mortgage contingency clause is no longer at play. You and the seller can breathe easier.
What happens if you aren’t able to fulfill the contingency: If you’re unable to secure a mortgage by this date, you can renegotiate with the seller, request an extension, or walk away without losing your deposit. Walking away from the contract would not be so easy had you waived the mortgage contingency. (More on this later in this post.)
Tips to navigate the mortgage contingency date
- Start the mortgage process early
- Keep all financial documents organized
- Maintain constant communication with your lender
- Be prepared for possible extensions or renegotiations
- Work with a top buyer’s agent who is familiar with contingency offers
Closing date
What the closing date represents: The closing date is when the transaction is finalized, and you officially become the owner of the home. It’s the culmination of the homebuying process. On average, after a purchase contract has been signed on a financed home sale, it takes around 45 more days to reach the closing date.
What needs to happen by that date: Before this date, you should complete all required paperwork, finalize your loan, and prepare for the final walkthrough of the property. Some things you’ll need to bring might include your picture ID, home inspection report, proof of homeowners insurance, and any required funding or fee payments or documents.
What happens after closing: After closing, you’ll receive the keys to your new home and assume responsibility for the property, including mortgage payments and maintenance. See the additional links within this post to get a better picture of what your closing date might look like.
What can go wrong at closing: Issues can arise from incomplete paperwork, last-minute financial changes, or unexpected property issues discovered during the final walkthrough. These closing date hiccups can be as simple as a misspelled name on a loan document to something overlooked on your insurance policy.
Tips to navigate the closing date
- Review all closing documents ahead of time
- Confirm all financial requirements are met
- Schedule a final walkthrough before the closing date
- Plan for unexpected delays or issues
- Have a top agent by your side so you’re fully prepared
Should I waive the mortgage contingency in my offer?
Deciding whether to waive the mortgage contingency is a significant choice that requires careful consideration of your financial situation and the housing market. Here are some factors to weigh:
- Financial security: If you’re confident in your financial stability and have a strong preapproval from a lender, waiving the contingency could make your offer more attractive to the seller. However, ensure that your loan approval is solid and unlikely to face obstacles.
- Market conditions: In a competitive market, waiving the mortgage contingency might give you an edge over other buyers. But remember, this increases your risk if your financing falls through.
- Risk tolerance: Waiving this contingency means if you fail to secure a mortgage, you could lose your earnest money deposit and face legal consequences. Assess your comfort with this risk.
- Backup plans: Do you have alternative financing options or sufficient funds to cover the purchase if your primary mortgage option fails? If not, keeping the contingency might be safer.
Ultimately, the decision to waive the mortgage contingency should be based on a thorough assessment of your financial security, the certainty of loan approval, and your willingness to take on associated risks. Consulting with a real estate agent and a financial advisor can provide valuable insights tailored to your specific situation.
What other contingencies can impact my closing date?
Here’s a brief look at other contingencies that might have you feeling like a funambulist (tightrope walker), balancing the need for safeguards with your desire to get an offer accepted on a home you love. These clauses all have the potential to delay your closing date if any issues arise:
- Inspection contingency: Allows you to negotiate repairs or back out if significant issues are found during a home inspection.
- Appraisal contingency: Ensures the property’s appraised value meets or exceeds the sale price. If it doesn’t, you can renegotiate or cancel the deal.
- Sale of current home contingency: If you need to sell your current home before buying a new one, a home sale contingency can delay closing until your existing home is sold.
- Title contingency: Protects you if there are issues with the property’s title, like liens or disputes, which need resolving before closing.
- Home insurance contingency: Requires you to obtain home insurance approval, which can be influenced by the property’s location and condition. This clause is becoming more common in disaster-prone regions.
Go from contingencies to closing with confidence
Balancing mortgage contingency dates and closing dates can be challenging, but the prize at the end of the line is a home that you can call your own. But each step matters, which is why it’s important to make plans and know how to avoid contingency and closing pitfalls.
If you’re feeling overwhelmed or unsure about how to proceed, expert guidance is just a click away. HomeLight can connect you with a top-rated real estate agent in your market who can provide the personalized advice and support you need.
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