If you are thinking about becoming a first time home buyer you may be familiar with the term, “mortgage contingency.” Of all the things you should know about financing a home, this is it. A mortgage contingency is a provision in your purchase agreement is that allows you to extract yourself from the purchase should your mortgage not be approved.
But I’m pre-approved you say? Indeed you may be. But a pre approval is simply the banks cursory look into your finances. Basically,because of your near perfect credit score and a few other things,the bank or other lender is saying, “Yea Ok, we’d love for you to apply.”
Pre approval is only the beginning of the process. Banks and lenders will then ask you to fill out a complete application,provide proof of employment,several years of tax returns and other documents. Your application will be submitted to an underwriter and then the real process begins.
Since 2008, the banks have been extra, extra careful and the government has passed laws requiring lenders to proceed through the process carefully and sometimes in a slower version of the old process. You ALWAYS want to have a mortgage contingency…..just in case.
I’ve recently seen purchases fall apart at the last moment just because of the lengthy process and last minutes glitches.
So unless you are a 100% cash buyer or 1000% sure that you wont change your mind and want to finance part of your purchase…make sure you have a mortgage contingency in place.