As a purchaser in contract it is recommended to have little
to no contact with the seller and the seller’s representatives regarding the
mortgage application process. Today nearly all residential real estate
contracts in New York include a Mortgage Contingency Clause. This Clause
provides the buyer the ability to opt out of the sales contract and receive a
full refund of their deposit should they apply for a mortgage loan and be
denied. The buyer typically has 45 days from the date the contract is signed to
invoke this opt-out and the seller may request to see proof of the bank’s
denial.
The Mortgage Contingency Clause may seem simple and
straight-forward when in reality it takes a few twists and turns. As a
purchaser who has likely paid 10% or more down you don’t want to say anything
to the seller that may appear to indicate a loan has been approved when it
hasn’t been. For this reason any communication with the seller’s
representatives regarding your loan and the Mortgage Contingency Clause should
be made by your attorney.
