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BROKER CORNER

Conventional Financing Contingency Loan Denial Letters

4/14/2021

7 Comments

 
Picture
​If a buyer is denied a loan, based on the loan described in the contingency, the buyer must 1) notify the Seller within the contingency time period AND must 2) provide the Seller with a Loan Denial Letter within seven (7) days from the date of notice. 
 
A Loan Denial Letter must be for the Loan(s) described in the Finance Contingency. A buyer may also apply for different conventional loans, however, the denial of such other loans is not be a basis for a buyer to terminate.  If there was an approved lender, the letter must be from the Approved Lender.
 
The Loan Denial Letter may be provided to Seller after the Financing Contingency Period has ended, if the seven (7) day period to provide the Loan Denial Letter falls outside of the Financing Contingency Period.  The reason for the additional 7-day period to produce the Loan Denial Letter is because lenders may not be timely.  It may take days for the lender to produce the letter.  If, however, the lender does not produce the letter within the 7-day period, the finance contingency is completed and cannot be relied on to terminate.  In effect, the sale becomes a “no financing” sale and the buyer’s earnest money is at risk.
If a buyer is denied a loan, based on the loan described in the contingency, the buyer must 1) notify the Seller within the contingency time period AND must 2) provide the Seller with a Loan Denial Letter within seven (7) days from the date of notice. 
 
A Loan Denial Letter must be for the Loan(s) described in the Finance Contingency. A buyer may also apply for different conventional loans, however, the denial of such other loans is not be a basis for a buyer to terminate.  If there was an approved lender, the letter must be from the Approved Lender.
 
The Loan Denial Letter may be provided to Seller after the Financing Contingency Period has ended, if the seven (7) day period to provide the Loan Denial Letter falls outside of the Financing Contingency Period.  The reason for the additional 7-day period to produce the Loan Denial Letter is because lenders may not be timely.  It may take days for the lender to produce the letter.  If, however, the lender does not produce the letter within the 7-day period, the finance contingency is completed and cannot be relied on to terminate.  In effect, the sale becomes a “no financing” sale and the buyer’s earnest money is at risk.
7 Comments
Kamal link
12/8/2021 06:03:58 pm

Thank you for the beautiful post!

Reply
Water Heaters link
12/8/2021 06:04:28 pm

A loan that is amortizing is one where the total balance of principal and the interest is paid off by the end of the loan duration. They are also known as self-liquidating loans.

Reply
Spanish Fort Al Roofer link
12/13/2021 02:15:12 pm

There are also non-conforming loans, which do not meet the requirements of the government entities. Thank you, amazing post!

Reply
Moving And Storage Service link
12/27/2021 03:19:32 pm

We will define and describe the general requirements of conventional financing. We will also explore the concepts and application of loan-to-value ratios as well as private mortgage insurance.

Reply
Timothy Black
7/18/2022 08:21:48 am

Is the lender required to provide seller with date of loan denial, and reason for denial.

Reply
Billy Joel Spinks
11/19/2022 01:49:49 pm

Can you tell me the Federal code regarding loan denial letters ? Thanks !

Reply
Lawton Dogging link
1/21/2025 06:46:51 pm

Thaanks for the post

Reply



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