14 Day Loan Contingency: How it Works and the Advantages

14 day loan contingency

14 day loan contingency and how it works

14 day loan contingency is a popular procedure in mortgage and real estate transactions that most people don’t know about. This is probably because it isn’t the type of procedure that allows for much time to enjoy entertaining thoughts. In order to understand the topic of 14 day loan contingency better  one need to first understand FHA loans and removing loan contingency.

14 day Loan contingency and loan contingencies in general are often used in real estate transactions as a way to protect the buyer in case they are unable to obtain financing. The condition says that the buyer doesn’t have to go through with the purchase if they can’t get a loan. It protects buyers from forfeiting their down payment or been responsible for damages if they can’t acquire financing.

In today’s post I will be sharing deep insight on what is 14 day loan contingency and how it works.

What Is 14 Day Loan Contingency

When it comes to buying a home, there are all sorts of things that can go wrong. So it’s important to protect yourself with a loan contingency, and a minimum of 14 day loan contingency is ideal.

A loan contingency is an insurance policy for your mortgage. If something happens that prevents you from getting a loan, the contingency kicks in and the deal is off. The length of loan contingency varies. It can range from 7 days to 30 days and sometimes even more. But a 14 day loan contingency is particularly a win-win because it gives enough protection to the buyer, yet the property owner don’t feel as if he is losing time.

There are all sorts of reasons why a loan might not go through. Maybe the property doesn’t appraise for the purchase price. It’s possible that the title is incorrect. Maybe you lost your job. Whatever the reason, loan contingency protects you from being stuck with a property you can’t afford.

Loan contingency however has its downside. It can make it harder to get your offer accepted by the seller especially when the duration appears long. Sellers know that if something goes wrong with the financing, they may not get paid. So they’re often reluctant to accept offers that contain a Loan contingency. And this is why I always propose 14 day loan contingency. Even if the deal doesn’t go through the buyer can quickly get other offers.

How Does a Loan Contingency Work

A loan contingency gives you peace of mind while buying a house because your loan is ready. A Loan contingency says you don’t have to buy the house if you can’t acquire a loan within a given period.

Loan contingencies are pretty standard in most home purchase contracts. So don’t panic when you see one. Your real estate agent can clarify any contract contingencies, and your loan officer can ensure the loan procedure proceeds smoothly.

Types of Loan Contingency

A loan contingency is a condition that one must meet for a home purchase to go through. Essentially, the buyer is telling the seller that they are only willing to proceed with payment if they can secure financing. If the buyer is unable to secure financing, then they are free to back out of the deal without any penalty.

There are a few different types of loan contingency that buyers can use. And here I share the 5 most common among them:

1. Mortgage Contingency

This clause also specifies when the buyer should obtain financing to purchase the home. If the buyer cannot secure a loan by the given timeline, the buyer can withdraw from the deal without any penalty. And in such a situation, the seller will put their home back on the market and find a different buyer. Once again 14 day loan contingency is the most popular here.

2. Title Contingency

This also helps provide the purchaser with the right to obtain a title and hype up any objections to the status of the title to your property, which must be cleared by the seller for the purchaser to close on the transfer title.

3. House Inspection Contingency

This clause involves the buyer’s window of time to get the property they plan to purchase professionally inspected. The home inspection also helps ensure no severe issues, such as a leaky roof, a faulty electrical system or structural defects. Once there is an issue the buyer can safely walk away from the deal.

4. Sale of Prior Home Contingency

This helps protect buyers who will need the cash proceeds from the resale of their existing home to afford a new house. If a buyer needs to sell their current house, they should first by the deadline indicated in the contract. Still, they will not be able to find a buyer, so they can also escape the real estate contract,” says Michael Noker, a Realtor with Realty One of New Mexico in Albuquerque.

5. Appraisal Contingency

It also helps safeguard the buyer by stipulating that the property must appraise for the indicated sales price, at a minimum, or the contract can be nullified. This happens because banks don’t like to loan money to borrowers for a house that will cost them more than it’s worth. This clause also indicates that the seller can opt to reduce the price to the appraised value.

6. Homeowners insurance contingency.

This clause also stipulates that the buyer should apply for and obtain homeowners insurance on the property. If they do not get t the necessary insurance, either party can withdraw from the contract.

Removing Loan Contingency

A loan contingency is an important part of the contract for home buyers. It protects them in case they are unable to secure financing.

But what happens when the buyer no longer needs loan contingency for protection and removing it becomes an option? First let me state that it is possible to remove your 14 day loan contingency.  And there are a few reasons why that may become necessary. They may have found another source of funding, or they may have been pre-approved for a loan. In either case, the buyer is now in a position to purchase the home without worrying about securing financing. So when that happens loan contingency is no longer necessary. And the wise thing to do is to remove it.

If you’re in a position to remove your loan contingency there are a few things you should keep in mind. First, make sure you have a backup plan in place in case something goes wrong with your financing.

Second, if you aren’t getting a loan to pay for the house, you should expect to pay more for it. And finally, make sure you understand all the ramifications of removing your loan contingency before you sign any paperwork.

Criteria to Qualify for Loan Contingency

Loan contingency is a feature of some home purchase contracts that protect the buyer if he or she is unable to secure financing by a certain date. Buyers who are unable to qualify for a mortgage based on their current financial situation can often still qualify if they have a loan contingency.

Generally, a loan contingency must meet three conditions to be valid:

  • The property must be put on the market at a price that the buyer is willing to pay.
  • The buyer must have a loan pre-approval from a reputable lender.
  • The loan must be for an amount that is equal to or less than the purchase price of the property.

If the buyer is unable to secure financing by the date specified in the contract, the seller may either extend the financing contingency date or release the buyer from the contract entirely.

In most cases, it is in the best interest of both parties to extend the contingency date so that the buyer can continue working towards securing financing. That is why it is good to start with 14 day loan contingency knowing that extension is a possibility.

How to Avoid a Loan Contingency Going Bad

There are several different things that you can do to avoid a loan contingency becoming something worse. First and foremost, you must make all of your mortgage payments on time. If you are even one day late, this could trigger a loan contingency.

Additionally, you should try to stay current on your property taxes and insurance. If you fall behind on these payments, it could also lead to a loan contingency.

Finally, if you are having trouble making your mortgage payments, you should contact your lender. And please do that as soon as possible to discuss your options. By taking these steps, you can greatly reduce the risk of a loan contingency becoming something worse like pre-foreclosure or foreclosure.

FHA Loan Contingency

When you’re shopping for a home, there are all sorts of things to think about. Things like location, size, style, and of course, price. If you’re not paying cash for your home, you’ll also need to factor in the cost of your loan.

But what if something happens to change the cost of that loan after you’ve already made an offer on a home? That’s where loan contingencies come in.

A loan contingency is a clause in your purchase agreement that protects you if you’re unable to get the loan you expected. If your loan condition is met, you can back out of the purchase without paying a fee.

This gives you some peace of mind knowing that you won’t be stuck with a home you can’t afford if something happens to your loan.

Loan contingency is often used when buyers are getting a mortgage through the Federal Housing Administration (FHA).

Because the FHA has certain requirements for borrowers, it’s possible that your loan could be denied even after you’ve been approved.

If this happens and your purchase agreement has a loan contingency you can back out of the deal without losing your earnest money deposit or facing any other penalties.

Tips on How to Apply for a Loan Contingency

Assuming you’re referring to a mortgage loan contingency:

A loan contingency gives buyers a way out of a purchase contract if they are unable to secure financing by a certain date. The contingency is usually included in the purchase contract with the date that the loan must be approved.

If the buyer is unable to get financing by that date, they can back out of the contract and not be held liable for any damages.

To add a loan contingency to your purchase contract, you’ll need to work with your real estate agent to include language that states you’re including a loan contingency in the contract. Make sure to include the date that the loan must be approved for the contingency to be valid.

After both parties sign the contract, you’ll have a certain amount of time to get financing before you can back out of the deal without paying any fees.

If you have worries about being able to qualify for a mortgage, a loan contingency gives you some peace of mind knowing that you can walk away from the deal if things don’t work out.

Just make sure to put an end date on the contingency so that you don’t get stuck if it takes longer than you expect to get financing.


As you can see, loan contingency is an important part of the home buying process. It protects the buyer in case they are unable to obtain financing for their purchase. Without a loan contingency, the buyer would be at risk of losing their deposit if they were unable to get a loan. So, if you’re planning on buying a home, make sure you include a loan contingency in your offer! 14 day loan contingency is a highly recommended option because it gives a win-win situation for both the buyer and the seller.

Also be careful to employ the FHA loan and also remove the loan contingency wherever necessary.

Also Read:

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