What Is a Mortgage Contingency in Massachusetts, and What Number Goes in It?
The mortgage contingency protects your deposit if you can't get your loan. What the number on the offer means, how the commitment date works, and when to lock your rate.
Every buyer using a loan in Massachusetts signs an offer with a mortgage contingency, and almost every first-time buyer pauses at the same line: "Why is there a number here that isn't my price?"
That number is your loan amount. Here's what it means, and why the dates around it matter as much as the number.
What does the mortgage contingency do?
It protects you if you can't get the loan. If you apply in good faith and don't receive a mortgage commitment by the date in the contract, and you give proper notice, you can generally exit the deal and get your deposit back.
Without it, if your financing fell through, you could lose your deposit.
What number goes in the mortgage contingency?
The loan amount: purchase price minus your down payment.
A real example from a recent offer I prepared: the buyer was using an FHA loan with 3.5% down. The mortgage contingency amount was 96.5% of the purchase price, which is the loan-to-value on that loan.
If you're putting 20% down on a $600,000 home, the contingency amount would be $480,000. If the terms of the loan you can actually get are worse than what the contingency describes, that's what the clause protects you against.
What is the mortgage commitment date?
The deadline for your lender to issue a commitment, their formal approval to fund the loan, usually with some conditions.
It's typically set a few weeks after the accepted offer and before closing. If you won't make it, you need to ask for an extension before it passes, in writing, through your attorney or agent. After the date passes, the protection may be gone.
A strong commitment date can also help you win. On a sale I handled in Leominster, the buyer's commitment date was four weeks before closing, and that helped the seller choose their offer over one that netted slightly more.
What happens between the offer and the commitment?
Once you have an accepted offer and a property address, your lender starts the formal process:
- Loan disclosures go out, including your loan estimate.
- The appraisal is ordered.
- Underwriting reviews your income, assets, credit, and the property.
- Conditions come back: usually a few more documents.
- The commitment is issued.
Respond to document requests the same day if you can. Most commitment delays are paperwork.
When should you lock your rate?
That's a timing decision to make with your lender. Rate locks commonly run around 30 days, so they're usually timed to your expected closing. If rates improve meaningfully before closing, some lenders will renegotiate, but don't count on it. Ask your lender how their locks and extensions work before you sign the offer.
What doesn't the mortgage contingency cover?
- Changing your mind. It's about financing, not cold feet.
- Problems you cause. Taking on a new car loan or changing jobs mid-process can derail approval, and may not be protected.
- A low appraisal, automatically. Whether a low appraisal lets you exit depends on the contract language and the loan terms. Read what happens when the appraisal comes in low.
Questions people actually ask.
What is the mortgage contingency amount?
The loan amount you're applying for: the purchase price minus your down payment. With 3.5% down, for example, it's 96.5% of the price.
What happens if I don't get a mortgage commitment by the date?
If you've applied in good faith and give proper notice before the deadline, you can generally terminate and recover your deposit. If the date passes without notice or an extension, you may lose that protection.
Can the mortgage commitment date be extended?
Yes, if both parties agree in writing. Ask before the deadline, through your attorney or agent.
Should I waive the mortgage contingency to win a house?
Only if you could close without the loan, or you fully understand the risk to your deposit. For most buyers, it's one of the most important protections in the contract.
This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.