All About Financing Contingencies

What is a Financing Contingency?

If you are using a loan to purchase a property in Georgia, you’ll be working with a lender and your Purchase and Sale Agreement will include a Loan Contingency Exhibit.  This Exhibit includes several key pieces of information and milestones that you as the buyer (in close collaboration with your lender) must meet to secure financing for the property.

The information in your Loan Contingency Exhibit will typically include:

1. Type of Loan: There are separate exhibits for Conventional, FHA, VA and USDA financing and these documents communicate the Buyer’s type of financing to the Seller.  
2. Loan Application Information: This information is communicated from the Lender to the Advisor and outlines the Buyer’s estimated loan amount, loan term, estimated interest rate and rate type. 
3. Approved Lenders: The Buyer’s preferred Lender’s information is shared with the seller. If a Buyer is still considering multiple lenders, then all lenders information shall be included. 
4. Length of Financing Contingency Period: This is the period of time provided within the transaction to ensure that the Buyer shall be deemed to have the ability to successfully obtain the loan. 
   • Essentially, in layman’s terms, the deadline relates to the Buyer’s financial situation and any circumstances that may have arisen since your loan application that would prevent the lender from funding your loan. Most commonly these are things like: if you lose your job and can no longer support the loan repayments, you’ve taken out another loan or made a large purchase (like a car), or the loan product the bank assigned is no longer available.
5. Appraisal Deadline: The lender will order an appraisal to verify the value of the property. This time period allows the Buyer to negotiate a lower purchase price if the appraisal came in lower than the purchase price. FHA and VA loans have an appraisal deadline of the Closing Date.