Contracts
A Delaware home purchase contract includes a mortgage contingency requiring the buyer to obtain financing at 7% or lower. If rates rise to 7.5% and the buyer cannot qualify, what happens?
AThe buyer must proceed with the purchase regardless of interest rates
BThe buyer may terminate the contract under the mortgage contingency and receive their earnest money deposit back✓ Correct
CThe seller must extend the closing date until rates fall below 7%
DThe earnest money is automatically forfeited to the seller
Explanation
The mortgage contingency protects the buyer if they cannot obtain financing at the specified terms. If the buyer cannot secure a loan at 7% or lower and properly invokes the contingency within the stated timeframe, they may terminate the contract and receive their earnest money deposit back.
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