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In NJ standard real estate contract form, does a mortgage contingency IMPLY the house must be appraised for at least the sale price?
Here is the clause in the standard contract: "IF THE MORTGAE LOAN HAS NOT BEEN ARRANED, OR IF HTE BUYRER HAS NOT NOTIFIED SELLER OF BUYER'S DECISION TO COMPLETE THE TRANSACTION WITHOUT OBTAINING A MORTGAGE COMMITMENT, ON OR BEFORE JAN. 01, 2014, THEN EITHER BUYER OR SELLER MAY VOID THIS AGREEMENT BY WIRTTEN NOTICE TO THE OTHER PARTY."
If the house is appraised at lower value than the sale price, does this mean the bank will not loan me the money, thus the mortgage contingency will be triggered? If that is the case, what is my option?
Well... do you need it to appraise for the full amount to qualify? If you're putting down enough money, you'd still qualify.
I am putting down 20%, the required loan from bank is 400k. so if the appraisal comes lower than the sale price , $500k. Will the bank still loan me 400k?
I am putting down 20%, the required loan from bank is 400k. so if the appraisal comes lower than the sale price , $500k. Will the bank still loan me 400k?
Ask the bank.
I don't think it implies anything about appraisal. If you want that in there I would make it a separate item.
I don't think it implies anything about appraisal. If you want that in there I would make it a separate item.
Right before the mortgage contingency clause, the contract states that I will put 20% down, and get $400k loan. If I can not get the $400k stated mortgage committment due to low appraisal, then it does trigger the mortgage contingency clause? Am I right on this?
Right before the mortgage contingency clause, the contract states that I will put 20% down, and get $400k loan. If I can not get the $400k stated mortgage committment due to low appraisal, then it does trigger the mortgage contingency clause? Am I right on this?
Right. That is what it is. It basically says if you don't get the mortgage you have an out. It doesn't say why you didn't get the mortgage. Could be appraisal issues. Could be your personal finance issues.
But really, you should be discussing these items with your agent/lawyer/bank. You certainly don't want to pull out the "the guys on the internet told me" defense.
From my experience this shouldn't be a problem for you as you are putting down $100,000. The bank only has to loan you $400,000 not the full $500,000. If you were needing a 100% mortgage and it didn't appraise then you would have to find the difference (or the seller would have to come down in price) to satisfy the bank.
If the house appraises for $475k then the decision is yours whether you want to purchase a house that is apprasied for less than what you are paying for it.
I am not a lender, so don't quote me on this, check with your mortgage rep.
If the house appraises for $475k then the decision is yours whether you want to purchase a house that is apprasied for less than what you are paying for it.
I am not a lender, so don't quote me on this, check with your mortgage rep.
Only if you have something in your contract that lets you cancel. If all you have is a mortgage contingency and the bank will still give you the loan at a lower appraisal you can't just decide you don't want to buy the house.
Only if you have something in your contract that lets you cancel. If all you have is a mortgage contingency and the bank will still give you the loan at a lower appraisal you can't just decide you don't want to buy the house.
Well the mortgage contingency is for getting a mortgage for the requested amount. If the mortgage amount offered by the bank is lower than what was requested, then OP can say that he did not get the mortgage and walk away from the contract, if he chooses.
Consider a hypothetical situation. Let us say the $500K property is appraised for $100K. Does this mean the borrower is on the hook to bring $400K to the closing table? I don't think so.
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