This is the seventh article in a series of articles about Buying and Selling a Home in New York State. Click here for the first installment in the series. Subscribe to this blog for future installments.
Q: Can I lose my downpayment, if I do not get financing?
A: Yes, it is possible to lose your downpayment if you cannot obtain a loan to purchase the property. While many people say that a contract has a “mortgage contingency,” most contracts for the purchase of a home are only contingent on the buyer receiving a “mortgage commitment.”
A mortgage commitment is an agreement by a lender to provide the buyer with a loan in a specified amount to purchase the home once certain conditions are met.
Most contracts generally provide that once the mortgage loan commitment has been issued, the buyer assumes the risk that the conditions of the commitment will be met and that the lender will actually fund or close the loan. The lender may not fund or close the loan for a variety of reasons, such as the buyer losing a source of income, the property not appraising for the contract price, or the buyer accumulating more debt after issuance of the mortgage commitment.
In view of the foregoing, it is important for an attorney to carefully review the mortgage contingency clause in the contract to protect your downpayment.
William E. Duquette, Jr. is an associate on the firm’s Real Estate Team. He can be reached by phone at 845-778-2121 toll free or 845-778-2121 and by email.