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Everything you ever wanted to know about the mortgage contingency in Connecticut is below!

Congratulations are in order, you have found a buyer for your Connecticut home, have entered into a contract and are now in the escrow process. Depending on the terms of your contract, you may have a number of contingencies that need to be removed before you can get your house to the closing table.

I am going to walk you through perhaps one of the most complicated and important contingencies of all, the mortgage contingency.

In essence, the mortgage contingency is in place stating that the buyer will secure commitment for a certain type of mortgage loan by a certain date or the contract can be canceled and earnest money deposit returned to the buyer.

It is also important to note that if commitment has not happened by the date in the contract then the real estate agents involved in the deal can work together to hopefully extend the date. This of course is assuming the buyers have been working diligently on securing a mortgage and the both parties are in agreement that an extension is what they both want.

So what is a mortgage commitment?

 

The mortgage contingency is typically satisfied when the mortgage lender issues a letter of commitment to the home buyers stating that they have approved the mortgage application, subject to terms and conditions in the letter.

This is an important point to pay attention to because this letter does not mean that the home buyers are 100% guaranteed a mortgage to buy your home, it is stating the lender will most likely provide a mortgage as long as the conditions are met in the letter.

What are some example conditions that could be in the mortgage commitment letter?

 

  • Verification of gift funds the buyer received from friends or family for the purchase of the home.
  • Verification of employment closer to the closing date
  • Verification that no major purchases have occurred impacting the debt to income ratio of the buyer
  • Verification of cleared checks used for earnest money deposit
  • Satisfactory completion of condo questionairre (condo’s only)
  • Verification of sufficient funds to close
  • Verification of a home owners insurance policy in place
  • Satisfactory title commitment

The above list are some of the most typical examples, however, it is important to note that the lender could put any conditions that they feel apply to the home buyers situation for obtaining the mortgage.

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What has to happen for the lender to issue mortgage commitment letter?

 

When you accepted an offer and entered into a legally binding contract, the buyer probably provided a pre-approval letter stating that they have been through a basic validation process that they meet the basic qualifications for obtaining a mortgage and next the borrower will need to go through a full mortgage underwriting process. 

So what is mortgage underwriting anyway?

 

This is where an actual live person (not a computer) carefully and diligently reviews the complete mortgage application to determine if the risk level of the borrower defaulting on the mortgage loan and if is an acceptable level for the lender to take on AND the property meets the lenders full qualifications.

It is important to note that every lender has different criteria they used to determine what an acceptable level of risk is and what property type they will accept.

One of the most important items that typically happens during underwriting is the appraisal of the property.

This is where a Connecticut licensed real estate appraiser will come to your home and determine a value that it is worth in today’s market. It is very critical to understand that if your home does not appraise at or above the purchase price then the lender can deny making a mortgage loan to the buyer. If this scenario was to happen, you have the right to cancel the contract and put your home back up for sale OR renegotiate with the buyer. 

A lot of real estate contracts will explicitly state that the property must appraise at or above purchase price. However, it is also implied when a mortgage contingency is in place and the lender requires the property to appraise at or above purchase price.

After the mortgage commitment letter is received by the buyer it is sent to the sellers and the mortgage contingency is satisfied.

This is a major hurdle and once you get there the chances of your home actually closing increases exponentially but don’t break out the champagne yet, in order for the loan to be funded and the buyers actually able to close the final hurdle is getting the “clear to close”.

What is clear to close?

 

Remember talking about the conditions in the mortgage commitment letter? Well, when those conditions are met and the lender is satisfied then they will typically issue what is referred to as “clear to close” and at this point the closing has the green light to be scheduled with the attorney’s from a mortgage perspective.

There is no definite day or timeline as to when clear to close happens. The can happen weeks, days or even hours before the actual close of the house!

Summary

 

The biggest take away is that if you accept a buyer who is relying on mortgage to purchase your home then you are always walking a tight rope and you are not safe until you get to the closing! Still have questions about the mortgage contingency in Connecticut? Please contact me to discuss getting you the information you are looking for.

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About the Author: The above real estate information on Mortgage Contingency in Connecticut a Sellers Guide was provided by Kris Lippi, a local Connecticut real estate agent serving Hartford and Tolland Counties.

Are you currently thinking about selling your home? I have an awesome marketing plan that focuses on what works to sell your home! Contact Kris Lippi for a no obligation discussion, call or text 860-930-1371.

Kris Lippi services real estate sales in the following Hartford and Tolland County towns: Andover, Avon, Berlin, Bloomfield, Bolton, Bristol, Burlington, Canton, Columbia, Coventry, East Granby, East Hartford, East Windsor, Ellington, Enfield, Farmington, Glastonbury, Granby, Hartland, Hartford, Hebron, Manchester, Mansfield, Marlborough, New Britain, Newington, Plainville, Rocky Hill, Simsbury, Somers, South Windsor, Southington, Stafford, Suffield, Tolland, Union, Vernon, West Hartford, Wethersfield, Willington, Windsor, Windsor Locks Connecticut

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