What is the Mortgage Contingency?

It's Not A Party Until the Lender Shows Up

The last main party to the deal is the buyer’s lender.  Love or hate, the lender facilitates the deal by lending money to you (loan) in exchange for a promise to pay it back (plus interest) and a security interest in the home (mortgage).  

The process from applying for a loan to receiving the loan at Closing is not an overnight process.  The lender will need to make sure the home is worth the purchase price by performing an appraisal and investigate the credit worthiness of the buyer(s).  It’s like a colonoscopy but worse (if you go with a bad lender). 

In case the loan application goes south, the contract allows a buyer to terminate the contract if the lender is unable to provide an “intent to proceed” letter early in the process and a “written mortgage commitment” letter later in the process.  In essence, this is another opportunity to walk away from the deal with a full refund of the earnest money.