If you are using a mortgage to purchase a home in Massachusetts, you will probably include a mortgage contingency in your offer to purchase and P&S agreement. Mortgage contingencies protect your escrow deposit in case you are unable to obtain a mortgage commitment by a certain deadline. The deadline and mortgage commitment details are extremely important to understand. It’s not as straight-forward as most people assume. Here’s what you should know about mortgage contingency deadlines for MA home purchases.
Significance of Mortgage Contingency Deadlines for MA Home Purchases
The mortgage contingency deadline noted in your purchase contract is a significant and solid date. You must notify the seller by that date if you are unable to secure a mortgage. Doing so will ensure that your deposit money is returned. Allowing the date to pass or notifying a seller after that date will put your deposit at risk.
If you are unable to meet the deadline, you have a few options…
- Request an extension to the deadline.
It will be up to the seller whether to approve such an extension. In most cases, a seller is better off giving you a little extra time than starting over with a new buyer (unless there happens to be a higher and better back-up offer waiting for them).
- Remove the contingency.
This basically puts your deposit at risk. If the mortgage does not get approved in time for the closing, the seller will fight to keep your deposit money to cover their losses.
- Terminate the Deal
If you do not believe that the mortgage will eventually be approved or if the seller is not willing to extend the deadline, you can basically terminate the deal (via the mortgage contingency clause) and receive a full refund of your deposit.
Understanding the Terms of a Mortgage Commitment
Most lenders will issue a conditional mortgage approval to serve as a mortgage commitment. What it basically says is that they believe they will be able to obtain full approval if the remaining conditions are met. As a buyer, you should review those remaining conditions carefully. Do not assume that they are all standard and easily cleared. If the conditions cannot be met and you learn this after the mortgage commitment deadline has passed, you will lose your deposit money! To best protect your interests, the conditional approval should only contain standard items to be completed just before or at closing.