What does a "mortgage contingency" in a purchase contract allow the buyer to do?

A mortgage contingency in a purchase contract serves as a protective clause for the buyer. It stipulates that the buyer can withdraw from the contract if they are unable to secure financing for the property purchase. This provision ensures that the buyer is not held to the contract if they cannot obtain a mortgage, which is often essential for completing the transaction.

This provision is critical because it allows the buyer to avoid financial loss or legal commitments if their loan application is denied or if they are unable to secure funding under suitable terms. Essentially, with a mortgage contingency, the buyer has the flexibility to explore financing options without the risk of losing their deposit or getting tied up in a purchase agreement they cannot fulfill.

Other options, like securing a lower interest rate or preparing an appraisal report, do not directly relate to the contingency itself. Similarly, changing the closing date is not a function of the mortgage contingency; such changes would typically depend on agreement between the buyer and seller. Thus, the core purpose of a mortgage contingency is to provide an exit strategy for the buyer if their financing falls through.