Financing Contingency On Home Purchase Contract
The real estate market nationwide is hot. Homeowners who had upside down mortgages are not able to sell their homes and move on to purchase a different home, whether they are downsizing or moving up to a larger home. There are more home buyers than home sellers and many areas in the country is experiencing a lack of housing inventory. It is a sellers market where most homes in hot areas in the country have multiple offers and home buyers are experiencing multiple bids on homes they want to purchase. There are many home buyers who have found themselves in a situation where they feel they must waive the financing contingency on their home purchase offer and some even consider waiving the home appraisal contingency as well to get the winning bid when putting in a home purchase offer. The number of cash home buyers have steadily been increasing as well. To compete with cash buyers and multiple offers, waiving financing contingencies is becoming more and more popular among home buyers.
What Happens If Financing Contingency Is Removed?
A Home Buyer waiving their financing contingency removes the protection for the home buyer in case anything goes wrong with their mortgage loan pre-approval and the mortgage lender does not go ahead with the loan approval process. There are many types of contingencies a home buyer normally puts on the home purchase contract such as home inspection contingency, appraisal contingency, and most common, the financing contingency. If the home buyer is willing to purchase a home as is and is willing to take the risk of doing the work to the home if there is something wrong and have the reserves to do it and want the home bad enough, then removing the home inspection contingency is not too big of a deal. As long as the home sits on a solid foundation and there are no structural issues or has major mechanical issues such as issues with plumbing, electrical systems, and HVAC systems, most other repairs can be affordable. If the home buyer waives the home appraisal contingency, then they need to be ready to pony up the additional funds for the down payment that is above the appraised value of the home in order to close on the home loan. This is also manageable and can be done as long as the home buyer wants the home bad enough and has the extra funds to put down for the down payment. However, if you waive your financing contingency, your earnest money will be at risk in the event if the mortgage loan does not go through. Home sellers will find real estate offers with no financing contingencies much more attractive because the home buyer is really putting a lot of skin in the game. Home buyers who need to waive their financing contingency need to speak with their mortgage loan originator and make sure that their pre-approval is iron clad solid. Mortgage loan borrowers with borderline credit scores, credit issues, and high debt to income ratios should not make a real estate purchase offer with their financing contingency waived. Those who are solidly pre-approved with high credit scores, solid verification of employment, with verification of rent and low payment shock, longevity on their jobs, perfect payment history, sufficient down payment, and lower debt to income ratios can consider waiving their financing contingencies.