Home Loan Approval with Contingencies
By John Mussi
There are times that a mortgage company may grant a home loan with contingencies. What this means is that the buyer must meet perform or provide certain additional information before you go to settlement, otherwise the lender will not disburse the funds. If the buyer is unable to meet these conditions, the sale becomes null and void and all monies are returned.
The definition of a conditional commitment
In some cases, a lender may issue a conditional commitment for a home loan. It means the mortgage is approved if the buyer or seller meets certain conditions prior to the time of settlement – these items are called contingencies. Although contingencies are usually placed upon the seller to perform things such as replace the roof, upgrade the heating system, or other similar expenses, sometimes a buyer is also given a conditional commitment. Before a settlement date is even scheduled, it will be necessary to provide proof to the lender that his conditions have been met so that he can issue a firm commitment on the home loan.
When conditional commitments may be issued
Depending on the circumstances of the buyer, several conditions may lead the lender to offer a conditional commitment on your home loan. In some cases, the lender will not even make a conditional commitment until these items are finalized. You need to understand that although an item may seem small to you, the lender has reasons why he is asking for certain conditions to be met.
If you have any unpaid past due or charged off accounts showing on your credit report, the lender may ask for proof that these accounts are paid in full. In the event that you have not paid these past due accounts or cannot provide proof that they have been paid, you will need to pay them again and produce a letter or receipt from the lender showing they are paid in full.
Although in most cases this is not necessary, if you have been on your job a short period, the lender may require some proof of continued employment just prior to closing the loan. This guarantees the lender that you are still working and are making at least the same salary you were making when the loan was approved. This is more common with government-backed loans that can take up to ninety days from the time of application to the time of closing.
If someone is helping you with the cost of settlement, the lender wants to know that this is a gift and not something that you must repay.
Conditions placed on the seller
In addition to conditions on the buyer, sometimes the lender requires certain things of the seller. Some things a lender might require of the seller include a new roof, repair or replacement of appliances included in the sale, and if the original termite inspection required treatment, a reinspection may be requested prior to closing. Although the lender’s priority lies with the buyer, he is more concerned with protecting himself and his company in the execution of the home loan. He certainly does not want to put a new buyer in the position of having to put out a large outlay of cash right after buying a new home. This could immediately put the buyer into a position of having to decide whether to fix the roof or pay the mortgage. These things will surely happen later, but a responsible homeowner will have a contingency fund for home repairs once he moves into the house.
You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
Article Source: http://EzineArticles.com/?expert=John_Mussi
Technorati Tags: contingencies, mortgage company, paid in full, met, past due accounts, settlement date, heating system, monies, credit report, commitments, null, receipt, additional information
