Short Answer
A financing contingency is a clause in your purchase contract that allows you to back out and get your earnest money back if your loan is not approved. It protects you from losing your deposit if your financing falls through for reasons beyond your control, such as a job loss, credit issue, or the property not appraising. The contingency has a specific timeframe, typically 30 to 45 days, and requires you to apply for a loan in good faith.
The financing contingency is one of the most important protections for buyers who are financing their purchase. Without it, you could lose your earnest money if your loan falls through. The contingency requires you to apply for a mortgage within a specified timeframe and make a good-faith effort to obtain financing. If your loan is denied, you can terminate the contract and receive your earnest money back. The contingency expires on a specific date, and once it expires, you waive your right to cancel based on financing. If you need to extend the deadline, both parties must agree. In competitive markets, some buyers waive the financing contingency to make their offer more attractive, but this is risky. Your agent should explain the financing contingency terms before you submit an offer.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
I always recommend keeping the financing contingency unless you are paying cash or have significant reserves. I have seen buyers lose earnest money because they waived the financing contingency and their loan fell through. If you need to be competitive, consider shortening the contingency period rather than eliminating it. Let me help you strike the right balance for your situation.
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