We are looking at brownstones in Brooklyn and sellers are asking us to waive the mortgage contingency. We are already pre-approved for a mortgage that is significantly larger than what we are expecting to borrow, but I am still nervous about waiving the contingency given that I don't have enough money to pay all cash. My question is, what are the circumstances in which the bank wouldn't fund after... [more]
We are looking at brownstones in Brooklyn and sellers are asking us to waive the mortgage contingency. We are already pre-approved for a mortgage that is significantly larger than what we are expecting to borrow, but I am still nervous about waiving the contingency given that I don't have enough money to pay all cash.
My question is, what are the circumstances in which the bank wouldn't fund after pre-approving me (particularly things that relate to the building that are beyond my control). I am less concerned about an appraisal that is a little low (since I couldn't put in some more cash, and more focused on more "fundamental" issues where the bank won't fund at all (e.g., bank suffers crisis, I lose my job after signing contract). Am I responsible if bank won't fund because of title problem, illegal renovation, etc?
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Response by jschwa
almost 12 years ago
Posts: 1
Member since: May 2008
Oops. meant "could put in some more cash" if appraisal is a little low
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Response by streetsmart
almost 12 years ago
Posts: 883
Member since: Apr 2009
I would not waive the mortgage contingency . Anything can happen and you 're left forfeiting a lot of money. I bought a property in a crazy Manhattan market and refused to buy a property that required no mortgage contingency . Stick by your guns and the broker will follow.
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Response by crescent22
almost 12 years ago
Posts: 953
Member since: Apr 2008
If you can't pay cash, don't waive contingency. Simple enough but if you must know, ask yourself how plain vanilla your applicant information is- how constant is your income, is it self-employment, are there things in your financials you have to explain like large recent deposits, do your taxes look normal, are you close to their 28% debt service/income line
A brownstone is positive (compared to an apt building) because the bank wont see it as problematic collateral in a foreclosure.
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Response by rb345
almost 12 years ago
Posts: 1273
Member since: Jun 2009
In today's market waiving a mortgage contingency is often necessary to get an offer considered
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Response by Ottawanyc
almost 12 years ago
Posts: 842
Member since: Aug 2011
Why not offer to put up a much larger down payment? That might give the seller enough comfort.
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Response by front_porch
almost 12 years ago
Posts: 5321
Member since: Mar 2008
I wouldn't do it. Banks are just too weird these days. (I know I've told this story before on these boards, but I was just at a closing where the bank pulled the loan AFTER they sent the money. Bank finally reversed themselves again, but it was a tense couple of hours for the purchaser!)
I guess the relevant questions are: Have you lost more than five bidding wars to cash buyers? Are you capable of recovering if you forfeit your entire deposit? Unless the answer to those two questions is "yes" I just wouldn't do it.
ali r.
{downtown broker}
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Response by shekfu
almost 12 years ago
Posts: 10
Member since: Feb 2008
mortgage nowadays takes forever, and they are checking things line by line on statements, tax return and everything. I just got my mortgage approved after 4 plus months. I'm not sure if the seller would wait for me if I didn't have my mortgage contingency. I'm certian they won't, if they could pocket my deposit!
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Response by FreebirdNYC
almost 12 years ago
Posts: 337
Member since: Jun 2007
Also I wouldn't overestimate the value of the pre-approval. In my experience, the banks will preapprove you without really checking any documentation (maybe your credit report and pay stub), while for an actual loan approval the hoops are a lot higher and in some cases dumber (e.g. I had one bank flip out that I couldn't prove that my year to date bonus was zero - since all paid at year end). If you're income is basically guaranteed (very low risk of job loss) or you have a ton of assets, may make sense to roll the dice, but otherwise think you'd be better off playing it safer.
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Response by rb345
almost 12 years ago
Posts: 1273
Member since: Jun 2009
1. as a seller I want certainty my sale will go through
2. in today's market that means financing contingencies could cause
me to reject an offer unless it contains some special incentive
3. also, I have had approved offerors manipulate the financing contingency
clause on several occasions to create un-closable contracts whose terms
would in substantive effect have given them options to buy but no duty
to do so (unclosable = contracts I could not legally enforce)
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Response by NYC10007
almost 12 years ago
Posts: 432
Member since: Nov 2009
shekfu, 4 plus months for mortgage approval? Wasn't your rate lock for 60 days? Are you talking 6 months from submission of ALL documentation? Were you financing exactly 80%? That sounds extreme, just wondering what the circumstances were there...
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Response by steveF
almost 12 years ago
Posts: 2319
Member since: Mar 2008
jsch...If your financial condition requires you to need a mortgage to make the purchase then I would def. NOT waive the mortgage contingency. Too much risk. Bank underwriters can flag you for anything all the way up to the commitment letter. Do you want to have sleepless nights for 4 month? Unfortunately for buyers today's market can dictate these types of demands from sellers. Since you are burdened by the mortgage need you must look harder to find something that works for you all around. Good Luck.
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Response by shekfu
almost 12 years ago
Posts: 10
Member since: Feb 2008
yeah. four month plus... no joke. I'm borrowing 75% with 60% cash after close. qualified income and everything, the thing is they are looking at everything microscopic. we were back and forth with question on everything, line by line, deposit by deposit and they don't ask all at once. it's crazy nowadays. my co-worker said 6 moths for him, but not sure how his financial is. he said they were asking for copy of his tax return check from 4 months ago, it's crazy now. my other co- worker said the bank made her miss her closing, she has to re-schedule after they got there.
also, my mortgage guy told me in advance to expect 3 months, so I didn't lock my rate until 3 months in, and yet I was able ( or have) to extend my rate . I'm just glad that I have my mortgage contingency and the seller were patient enough to wait. After all, he didn't know it was going to be 4 months, but it was extremely stressful! btw, that was my fifth time getting mortgage and I've used them all, banks, mortgage broker and credit union etc. it's just the environment we are in now.
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Response by shekfu
almost 12 years ago
Posts: 10
Member since: Feb 2008
oh yeah, I thought about cashing in my 401k to pay cash, but I would have nothing left... anyway, dddddddddon't waive it ! and good luck!
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Response by Ottawanyc
almost 12 years ago
Posts: 842
Member since: Aug 2011
Rb: explain this uncloseable contract loop if you could!
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Response by sterling111
almost 12 years ago
Posts: 0
Member since: Apr 2014
We just bought and had to waive the contingency in order to get the place we wanted. It took us less than two months from the offer to closing (20/80 equity/mortgage.) We had three lenders working on the loan (did not mind paying an extra appraisal fee) all the way until after the appraisal, then still had two wait on the sidelines if anything went wrong with the one we picked. Luckily, everything went without a glitch. Things we were focused on - 1. Make sure if you are buying in a coop, the building is approved by the lending bank 2. Do not settle for a simple per-approval – talk to the loan officers and grill them on the potential red flags in your application. They were open with us (and our case was not straightforward/clean cut.) Also, we made sure that all three banks knew each was not the only game in town, and that they competed for our business.
Good luck!
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Response by jelj13
almost 12 years ago
Posts: 821
Member since: Sep 2011
shekfu: We had a similar problem with the mortgage company last fall asking of proof of every little thing about 2 weeks before closing. It drove us crazy because we were putting 63 % down and could have paid cash. We started to get the feeling that they were looking for an excuse not to give us a mortgage. They did give us the approval to close, but it took over a week.
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Response by Flutistic
almost 12 years ago
Posts: 516
Member since: Apr 2007
What we did was pay cash for the place, then get a HELOC after closing. If you do a rollover from your retirement funds, it's a high stakes strategy because you only have 60 days to refund your retirement accounts before you owe taxes. Citibank got us the HELOC money in about 50 days.
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Response by Friend
over 11 years ago
Posts: 10
Member since: Feb 2014
Has anyone tried to negotiate with developers on waving no contingency clause?
New developments won't even talk to you if you ask. This seems to be a trend now as developers are in the driving seat.
You have no choice if you want to be in the new development. Does anyone have any luck waving this for a new development?
I want to hear from you guys.
Oops. meant "could put in some more cash" if appraisal is a little low
I would not waive the mortgage contingency . Anything can happen and you 're left forfeiting a lot of money. I bought a property in a crazy Manhattan market and refused to buy a property that required no mortgage contingency . Stick by your guns and the broker will follow.
If you can't pay cash, don't waive contingency. Simple enough but if you must know, ask yourself how plain vanilla your applicant information is- how constant is your income, is it self-employment, are there things in your financials you have to explain like large recent deposits, do your taxes look normal, are you close to their 28% debt service/income line
A brownstone is positive (compared to an apt building) because the bank wont see it as problematic collateral in a foreclosure.
In today's market waiving a mortgage contingency is often necessary to get an offer considered
Why not offer to put up a much larger down payment? That might give the seller enough comfort.
I wouldn't do it. Banks are just too weird these days. (I know I've told this story before on these boards, but I was just at a closing where the bank pulled the loan AFTER they sent the money. Bank finally reversed themselves again, but it was a tense couple of hours for the purchaser!)
I guess the relevant questions are: Have you lost more than five bidding wars to cash buyers? Are you capable of recovering if you forfeit your entire deposit? Unless the answer to those two questions is "yes" I just wouldn't do it.
ali r.
{downtown broker}
mortgage nowadays takes forever, and they are checking things line by line on statements, tax return and everything. I just got my mortgage approved after 4 plus months. I'm not sure if the seller would wait for me if I didn't have my mortgage contingency. I'm certian they won't, if they could pocket my deposit!
Also I wouldn't overestimate the value of the pre-approval. In my experience, the banks will preapprove you without really checking any documentation (maybe your credit report and pay stub), while for an actual loan approval the hoops are a lot higher and in some cases dumber (e.g. I had one bank flip out that I couldn't prove that my year to date bonus was zero - since all paid at year end). If you're income is basically guaranteed (very low risk of job loss) or you have a ton of assets, may make sense to roll the dice, but otherwise think you'd be better off playing it safer.
1. as a seller I want certainty my sale will go through
2. in today's market that means financing contingencies could cause
me to reject an offer unless it contains some special incentive
3. also, I have had approved offerors manipulate the financing contingency
clause on several occasions to create un-closable contracts whose terms
would in substantive effect have given them options to buy but no duty
to do so (unclosable = contracts I could not legally enforce)
shekfu, 4 plus months for mortgage approval? Wasn't your rate lock for 60 days? Are you talking 6 months from submission of ALL documentation? Were you financing exactly 80%? That sounds extreme, just wondering what the circumstances were there...
jsch...If your financial condition requires you to need a mortgage to make the purchase then I would def. NOT waive the mortgage contingency. Too much risk. Bank underwriters can flag you for anything all the way up to the commitment letter. Do you want to have sleepless nights for 4 month? Unfortunately for buyers today's market can dictate these types of demands from sellers. Since you are burdened by the mortgage need you must look harder to find something that works for you all around. Good Luck.
yeah. four month plus... no joke. I'm borrowing 75% with 60% cash after close. qualified income and everything, the thing is they are looking at everything microscopic. we were back and forth with question on everything, line by line, deposit by deposit and they don't ask all at once. it's crazy nowadays. my co-worker said 6 moths for him, but not sure how his financial is. he said they were asking for copy of his tax return check from 4 months ago, it's crazy now. my other co- worker said the bank made her miss her closing, she has to re-schedule after they got there.
also, my mortgage guy told me in advance to expect 3 months, so I didn't lock my rate until 3 months in, and yet I was able ( or have) to extend my rate . I'm just glad that I have my mortgage contingency and the seller were patient enough to wait. After all, he didn't know it was going to be 4 months, but it was extremely stressful! btw, that was my fifth time getting mortgage and I've used them all, banks, mortgage broker and credit union etc. it's just the environment we are in now.
oh yeah, I thought about cashing in my 401k to pay cash, but I would have nothing left... anyway, dddddddddon't waive it ! and good luck!
Rb: explain this uncloseable contract loop if you could!
We just bought and had to waive the contingency in order to get the place we wanted. It took us less than two months from the offer to closing (20/80 equity/mortgage.) We had three lenders working on the loan (did not mind paying an extra appraisal fee) all the way until after the appraisal, then still had two wait on the sidelines if anything went wrong with the one we picked. Luckily, everything went without a glitch. Things we were focused on - 1. Make sure if you are buying in a coop, the building is approved by the lending bank 2. Do not settle for a simple per-approval – talk to the loan officers and grill them on the potential red flags in your application. They were open with us (and our case was not straightforward/clean cut.) Also, we made sure that all three banks knew each was not the only game in town, and that they competed for our business.
Good luck!
shekfu: We had a similar problem with the mortgage company last fall asking of proof of every little thing about 2 weeks before closing. It drove us crazy because we were putting 63 % down and could have paid cash. We started to get the feeling that they were looking for an excuse not to give us a mortgage. They did give us the approval to close, but it took over a week.
What we did was pay cash for the place, then get a HELOC after closing. If you do a rollover from your retirement funds, it's a high stakes strategy because you only have 60 days to refund your retirement accounts before you owe taxes. Citibank got us the HELOC money in about 50 days.
Has anyone tried to negotiate with developers on waving no contingency clause?
New developments won't even talk to you if you ask. This seems to be a trend now as developers are in the driving seat.
You have no choice if you want to be in the new development. Does anyone have any luck waving this for a new development?
I want to hear from you guys.