Mortgage Contingency Clause
A written real property contract may include mortgage contingency clause, conditioning the contract on the buyer obtaining a mortgage of a certain amount / interest rate. If the buyer cannot obtain those exact or better terms, then he or she may be excused from the contract.
- Example : Adrian enters into a contract to purchase Shelly’s house for $400,000. Adrian puts $50,000 down, and the contract of sale has a mortgage contingency clause specifying that Adrian will obtain a mortgage commitment of $350,000. Adrian complies with his mortgage company’s requests. However, Adrian is only approved for a mortgage of $275,000. If he chooses, he can cancel the contract and his $50,000 down payment will be refunded.