What Waiving Your Financing Contingency Means How To Handle Your Financing Contingency

Should you waive your financing contingency? What do you need to know if you do? Waiving this contingency is a serious decision. It may make your offer more competitive, but it could also come with significant consequences. That’s why you need to know ahead of time what your financing contingency does and what waiving it means.

The financing contingency protects your deposit money when you enter into a contract with the seller. If your financing falls through, this contingency will let you get your deposit money back, which could be tens of thousands of dollars.

The lack of inventory we’ve seen in the market has caused a spike in competition, and many buyers have resorted to waiving their rights and protections in their contracts to entice the seller. One of those strategies involves waiving the financing contingency. This is risky because a few things can go wrong with the process. Your financing is based on an underwriter’s review of your employment stability, income, assets, credit report, and liabilities. All of these are measured against a specific purchase price, and your approval could be denied if any of these items change.

You can mess up your financing by buying a car before closing and not informing your lender, for example. Rising interest rates might also change your loan drastically. Check with your lender once in a while, and maybe have them pre-approve you at a higher rate so you have some breathing room. You might be curious about how you can waive the financing contingency, and while I don’t encourage that, there are seven ways to minimize your risk if you decide to do so:

1. Consult your trusted real estate advisor. Your buyer’s agent can tell you if waiving your financing contingency is necessary in your market.
2. Get a pre-approval. This will help you lay a good foundation for your strategy.
3. Know your numbers. Ask your loan officer for the worst-case scenario for taxes, closing costs, payments, etc. You also want to know if they’re making any assumptions about your income.
4. Get a loan commitment upfront. Have your lender send the loan to the underwriter before you go shopping. Not all lenders will do this, so find one who does.
5. Check the home insurance and tax rates. These can be higher than expected, so keep an eye on the numbers the lender used. You should also watch out for county loan limits.
6. Meet with your agent. Ask for their guidance and input when you write offers for specific properties.
7. Meet with your attorney. Ensure there’s language in the contract that minimizes your losses in case something falls through.

This is a big topic, and there’s much you should know before you waive your financing contingency. If you have any further questions, feel free to call or email me. I would love to help.