A financing contingency is a clause in a home offer that lets the buyer back out without penalty if they can’t finalize their mortgage in time. Financing contingencies can be a headache for sellers, which is why many prefer to just sell to cash buyers who don’t need financing.

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

Author Bio

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Chris helps people under 30 prosper - both financially and emotionally. In addition to publishing personal finance advice, Chris speaks on the topics of positive psychology and leadership. For speaking inquiries, check out his CAMPUSPEAK page, connect with him on Instagram, or watch his TEDx talk.