Know Your Contingencies, Protect Your Deposit When Buying A Home


Have you ever signed up for a service and skipped over the pages upon pages of terms and regulations? We all have. One place where understanding all of the fine print is more necessary than other areas is when you sign a contract to buy a new home. If you or your realtor fail to understand a few key details, you may be out of luck when it comes to the property, as well as out of luck when it comes to your deposit.

The key to keeping your cash safe is by understanding contingencies within the contract on a home. Financing contingencies touch upon topics such as what kind of loan you’ll receive, as well as what amount of time you have to receive it.

Many buyers think that they’re in the clear when they receive pre-approval for a loan (even worse is assuming you’re clear after a pre-qualification…learn more about the difference in those processes with this video).  More important, however, is the loan commitment. This is the lender’s ability to guarantee that they can provide a loan. A commitment comes after the underwriting process, after the appraisal, and after all of the supporting documents have been reviewed.

Still, even with this guarantee from the lender that it will close on the home and the mortgage, you’re still not at the finish line. You need to make sure that you attain that loan within a certain period of time, usually inside of 45 days.

That said, it’s not uncommon for listing agents or buyer’s agents to push for quicker loan commitment dates, such as 30 days, or even earlier. It’s up to the buyer to ensure that the lender and the respective agents are on the same page, and that the loan commitment is completed in time for the loan commitment date.

What’s at stake if you can’t manage to pull it off? First, there’s the bad: You don’t end up with the home you’ve already signed a contract to purchase. Then there’s the worse: You may not get your earnest deposit money back. Earnest money is put down by a buyer to demonstrate that they’re serious about buying a home. This cash would typically go toward the down payment once all of the details are worked out for the purchase.

If you don’t make sure that you have a loan in time to meet the loan commitment date, however, the seller can keep the thousands of dollars you planned on putting toward their home, and you have nothing to show for it.

Don’t let yourself end up in such a situation. Communicate with your realtor and lender to make sure that all of the dates line up, so that your earnest cash ends up where it belongs: as part of the down payment on your new home.

Primary Mortgage Residential wants to help you get into a new home, and we offer a variety of resources to help you understand the financial process and how to get the best deal on your way to that home. Use these options to get expert tips on home-buying and shopping for loans.

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Leave a comment below, and a member of our qualified staff will be pleased to help you out!If you’d like to learn more about protecting your deposit or the details hidden in a homebuyer’s contract, be sure to watch and share our video on contingencies and how they can cause you to lose your earnest cash deposit!Subscribe to our YouTube page for fresh and frequently updated content, keeping you on top of the industry.

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