A commitment to make the loan that is conditioned on obtaining an appraisal satisfactory to the lender, is not considered a firm loan commitment until that condition is removed.
If the appraisal eventually comes in at a number that is too low to support the amount of loan applied for the purchaser may elect to terminate the contract and receive back the down payment.
At the same time, a buyer must be mindful of the date of the mortgage contingency period in the contract. If the loan commitment is not received by the listed date, the purchaser may terminate the contract and receive back the down payment, or ask the seller for an extension of that date.
If an extension of the mortgage contingency is not obtained from the seller in writing, the purchaser could be deemed to have waived the mortgage contingency and be required to close without financing and could lose the deposit. Such a waiver of the contingency can be prevented by making sure such a waiver provision is deleted from the contract. An experienced real estate attorney will be able to easily identify this waiver language and will seek to strike this language from the contract during contract negotiation.
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