Loan Application, Contingencies, and Approval

Immediately after the contract is effective, the buyer must begin the financing process by submitting a formal loan application to a lender. The contract usually includes specific "contingencies," which are safety clauses allowing the buyer to cancel the contract without penalty if certain conditions are not met. The most common contingencies relate to financing and the property's value. The lender will order a professional appraisal to ensure the home is worth the purchase price. If the appraisal comes in at value and the buyer’s financial background is verified, the lender issues a formal loan approval, signaling that the funds will be available for closing.