5 Reason to Waive Mortgage Contingency When Buying a House

In the US, typical homes now cost nearly $350,000. For many people, rising home prices have made it more difficult to purchase a home.

Buying a house doesn’t have to be complicated, though. There are steps you can take to increase your chances of success.

If you choose to waive mortgage contingency, you can have an easier time finding the right house for you. Let’s look at why you should do so.

1. You’re in a Competitive Market

This is the primary reason people choose to waive mortgage contingency. When markets are competitive, it can be difficult to get things off the ground when making an offer.

To make your offer more appealing, waiving contingencies is a great step to take. In general, sellers aim to find a buyer as soon as possible.

Ideally, they would work with a cash buyer with no contingencies. This can significantly expedite the sale.

The next most attractive option is a cash buyer with contingencies. The good news is that very few people purchase homes in cash. Buyers who require financing but choose to waive contingencies are still attractive options to sellers.

2. Your Agent Recommends It

In some situations, your agent will recommend waiving mortgage contingency. This scenario often arises when everything else about the offer is already in the buyer’s favor but the seller is apprehensive.

For instance, the seller might be considering three different offers for similar amounts that all require financing. If one buyer chooses to waive contingencies, that person becomes the most logical buyer for the seller to work with. Put simply, waiving mortgage contingency is a method to make a good offer great, but not a bad offer good.

3. You Need a House Fast

As previously mentioned, the removal of contingencies can speed up the transaction. Many buyers need homes as soon as possible, especially those who relocate to different states.

In conventional settings, it can take weeks or even months to finalize a sale. Reducing this amount of time could help you move on to a new chapter in your life as soon as possible.

Buyers sometimes need to sell their existing home before they can purchase a new one. A company like First Call Home Buyer can help optimize the transaction.

4. You’re Fine With Extra Risk

Waiving contingencies inherently comes with extra risk. However, this is especially true when it comes to your mortgage contingency.

In the event that you can’t secure financing, you run the risk of losing your down payment. In most cases, this is tens of thousands of dollars.

The presence of extra risk doesn’t mean things are guaranteed to go poorly, though. If everything else is in your favor, the extra risk you assume through waiving is likely negligible.

Your agent can help you assess your situation and come up with the best course of action. As long as you work with someone experienced, they will prevent you from making the wrong decision.

5. Financing Isn’t an Issue

The main problem people encounter when waiving mortgage contingency is difficulty securing financing. If financing isn’t a problem, then this is nothing to worry about. For instance, you might have received pre-approval from a mortgage lender and also have a substantial monthly income.

The more secure your financing options are, the better. In contrast, those with shaky financing prospects, low income, etc. should avoid waiving their mortgage contingency.

How the Process Works

This is a condition that protects the buyer if they can get financing from a loan provider. For buyers to show they are serious about purchasing a home, they need to put down an earnest money deposit.

Doing so helps eliminate situations where unqualified buyers waste the seller’s time with low offers. With a mortgage contingency in place, buyers can get this money back if they aren’t able to get a loan. It doesn’t protect them if they change their mind about buying the home, however.

By waiving this contingency, you’re assuming extra risk in the form of losing the money you put down. A typical scenario could involve someone putting $20,000 down toward a $300,000 home and waiving their mortgage contingency to speed up the process. If they don’t get financing by a predetermined date, they could lose this money.

For this reason, you should only waive your mortgage contingency if you have solid financing options. Typical contingency periods are between 30 and 60 days.

In most cases, this is plenty of time to find a lender. Things can become complicated in certain situations, such as if you have a poor credit history or low income.

Common Terms and Conditions

In a typical mortgage contingency, there are certain conditions buyers need to meet. One of the most common is the buyer borrowing no more than what is specified in the agreement. They are also required to fill out loan applications truthfully.

Once the buyer receives loan approval, they will have to proceed with the transaction. If they choose to back out of the deal, they don’t get their money back.

Waive Mortgage Contingency When Buying

Choosing to waive mortgage contingency can help make your buying journey much smoother. From here, you’ll have an easier time getting the home of your dreams. Just be sure to work with a reputable professional so you can avoid complications.

Our blog has many other real estate articles that can help you make better purchases in the future. Check them out today to see what you can learn.