Financing Contingency

Obtaining a loan involves being approved personally as well as having the property approved, which makes borrowing money one of the biggest obstacles to purchasing a house.

By now, the buyer should already have been pre-approved and have provided a letter stating such in their offer. Here are the remaining steps that the buyer will need in order to obtain a mortgage:

• Pre-qualification

• Pre-approval

• Approval of their financial situation upon pulling their credit score and verifying documents

• Appraisal valuing the property at or above the purchase price

• Underwriter's approval of the home purchase upon analyzing financials of both the buyer and the property

Even if the buyer didn’t include an Appraisal Contingency, the buyer’s lender will almost certainly require that the property appraise for at least the purchase price. If your property doesn't appraise for at least the purchase price, you’ll still be able to proceed with the purchase, but you may need to renegotiate the terms with the buyer or the lender won’t approve the loan. 

This is never an ideal situation for either party. If the buyer included this contingency, you won't receive the earnest money deposit as compensation, and both parties will have wasted time. The buyer can try to find an alternate lender, but that might take precious time you could instead spend  looking for a more qualified buyer. If the buyer isn’t approved, you’ll have the option to back out of the contract.