Financing contingency
A contingency that lets the buyer walk if they can't get the loan they need. There's usually a deadline for the buyer to remove it, called loan approval or loan commitment.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Most sales that fall apart fall apart here. The buyer's loan can be denied for reasons that have nothing to do with your house, and this contingency is what lets them leave with their deposit when it is.
Part 2 of 4
A simple example
A financed offer at $300,000 with a financing contingency through day 30. On day 24 the lender declines the loan because the buyer changed jobs.
| What happens | What the contingency does |
|---|---|
| Loan declined on day 24 | The buyer can cancel and their deposit usually goes back |
| Loan commitment arrives on day 28 | The contingency is removed; the buyer is committed |
| Loan declined on day 35, after the deadline | The buyer may still leave, but the deposit is now in question |
The deadline turns a buyer who might get a loan into one who has one.
Part 3 of 4
What people get wrong
That a preapproval letter means the financing contingency is a formality. The loan is not real until the commitment, and the contingency is there for the gap between.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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