Contracts
What is a 'mortgage contingency' in an Illinois real estate purchase contract?
AA clause requiring the buyer to have mortgage pre-approval before submitting an offer
BA provision allowing the buyer to void the contract if they cannot obtain financing within a specified period✓ Correct
CA requirement that the seller pay the buyer's closing costs if financing falls through
DA lender's condition for approving a mortgage on the property
Explanation
A mortgage contingency (financing contingency) allows the buyer to void the contract and receive a refund of earnest money if they are unable to obtain financing meeting specified terms (loan amount, interest rate, term) within a defined period. Without this contingency, a buyer who cannot secure financing may forfeit their earnest money for failing to close.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
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