Posted by: Robin Gronsky | September 24, 2012

What Happens If I Don’t Have a Mortgage Commitment By the Date in My Contract?

Most real estate contracts have a clause in them that allow a buyer to get all of their deposits back from the seller if they do not qualify for a mortgage by a certain date.  Having a date in this clause is meant to limit the amount of time a seller is forced to keep his home off the market before he learns that the sale may not go through.  Many times, my buyer clients get close to that date in the contract (known as a mortgage contingency date) and they still don’t have an answer from their lender as to whether they will be getting a mortgage.  What happens then?

I am a stickler for requesting in writing and receiving an answer in writing an extension of the mortgage contingency date.  This means that a couple of days before the mortgage contingency date in the contract, I ask my clients whether they have a mortgage commitment letter in their hands.  If they do, I ask for a copy.  If they do not, I request an extension of the mortgage contingency date and send it by fax or email.  Even if my clients have been promised that this letter is coming in a day or two, I send this letter to the sellers’ lawyers.  Typically, I ask for an extension of 7-10 days, depending on what my clients have heard from their lenders.  I make sure I get a writing from the sellers’ lawyers agreeing to the extension and stating how long the extension will last.

If, on the last date of the extension, my clients still do not have a written commitment letter in their hands, I request, in writing, a second extension of the mortgage contingency date.  At this point, sellers’ lawyers want to know why there is no commitment letter yet and I must get a reason from my clients’ lenders.  If the reason given sounds plausible, the sellers will usually agree to a second extension.  After all, they don’t want to cancel the contract and put their house on the market.

So long as you are diligently pushing your lender to get to a decision on your mortgage loan application and your lawyer is careful to have all requests for extensions of the mortgage contingency date in writing and the decisions from your seller’s lawyer in writing, you will have preserved your rights in the event that your lender ultimately decides not deny your mortgage application.


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