In early 2021, I was having a socially distanced coffee with my friend Sarah who’d just bought a house. In between sips of my latte, she was describing everything she and her husband Han did to make their offer as appealing to sellers as possible. “We even waived our financing contingency. That might’ve been what did it.” So what is a financing contingency in a home offer? Why did the seller of Han and Sarah’s new home get excited about them dropping it? And when is it safe for you to remove the financing contingency from your own offer? Let’s investigate.
What is a financing contingency?
A financing contingency, aka a loan contingency or mortgage contingency, is a clause within your home offer that lets you back out of the deal if you can’t secure your mortgage. It states to the seller:
Me, when I can’t secure financing during closing