“If I don’t waive my mortgage contingency, I won’t get a house, right?”

Wrong! Every 4 Buyers Real Estate client has either had a mortgage contingency, or they had funds to close without a mortgage.  We believe the risk of losing 5 percent of a home purchase price is too high a risk. Our agents would be irresponsible to advise anyone to take that risk.

The fiercely competitive real estate market is still with us. Every buyer we work with has either purchased with a mortgage contingency or they have the funds to close without a mortgage. Seller’s agents are still pressuring buyers into waiving their mortgage contingency. Our buyers know better.

What is a mortgage contingency?

An Offer to Purchase real estate form from the state or local Realtor association has two (or three) clauses that are standard. One is for mortgage contingency, and the other one (or two) have to do with inspections.

The mortgage contingency says that the buyer will apply for a mortgage of a certain size by a certain date. If the mortgage does not come through, the buyer may get their five percent deposit back by a certain date.

What could a buyer lose? Mortgage failure is very rare, but the consequences are large: A buyer can lose their deposit is 5 percent of your purchase price, or more. The seller can keep your deposit, then sell the house to someone else a few weeks later. They do not need to prove that they took any financial loss because you didn’t buy their house. We don’t know anyone who can afford to lose five percent of the price of a property in eastern Massachusetts.

Using a solid mortgage approval as a tool in negotiations:

If you have a pre-approved mortgage, you are very likely to get your mortgage. If you have a pre-underwritten mortgage, you are even more likely. However, if you waive your mortgage contingency, and something does go wrong, the seller can keep your deposit if you can’t close on time.

Pre-approved mortgages:

With a pre-approved mortgage, the lender has documented what you earn and what you owe. The lender has done a credit check. If nothing changes in your financial life, you have been approved for the purchase, pending an appraisal and proof nothing changed before closing.

Pre-underwritten mortgages:

With a pre-underwritten mortgage, the lender has not only documented what you earn and what you owe and done a credit check. The underwriter – the person responsible for giving your loan a final approval – has reviewed your application packet.

Experienced seller’s agents know that pre-underwritten and pre-approved buyers almost always get their mortgages. Those who use reputable lenders get their mortgages on time. To strengthen the security of your mortgage pre-approval or pre-underwriting, we at 4 Buyers Real Estate do these things:

  1. Keep the mortgage contingency deadline as short as possible.
  2. Promote the lender as a professional we have experience with (whenever that is true).
  3. Stand on our reputation for bringing prepared buyers who follow through and close on time.

We have had the experience of getting offers accepted with a mortgage contingency, when there was a competing offer without one. It can be done.

It will not work every time. There are listing agents who are convincing sellers to avoid any risk of mortgage failure, even though they know that failure is very rare with pre-approved and pre-underwritten mortgages.

We think that if sellers are thinking about who will be buying their house, they should be kinder to people who are getting mortgages. Chances are they got one when they purchased. Agents who are making a point of collecting “clean offers” are not necessarily doing a service for their clients, or for the community.