The Mortgage Contingency in Pennsylvania — What It Protects and How It Works

How the Mortgage Contingency Works

The standard Pennsylvania Agreement of Sale includes a mortgage contingency specifying the loan amount, loan type, and interest rate cap the buyer needs to obtain financing. If the buyer is unable to obtain a mortgage commitment on those terms within the contingency period — typically 21 to 30 days — they can terminate and recover their earnest money.

Once the buyer receives a mortgage commitment letter, the mortgage contingency is typically satisfied and the buyer can no longer use financing as a basis for termination. If financing later falls through due to a change in the buyer's financial situation, the buyer may not be protected by the contingency depending on the circumstances.

Pre-Approval Versus Mortgage Commitment

Pre-approval is a preliminary lender assessment based on the buyer's financial information — not a commitment to lend. Mortgage commitment is the lender's formal approval of a specific loan on a specific property after full underwriting. Sellers who accept offers from buyers with only pre-approval letters are accepting more financing risk than sellers whose buyers have completed full underwriting.

Mortgage Contingency Pennsylvania — FAQ

What is the mortgage contingency in Pennsylvania real estate?

A clause allowing buyers to terminate the Agreement of Sale and recover their earnest money if they cannot obtain mortgage financing on the specified terms within the specified timeframe. Protects buyers from being obligated to complete a purchase they cannot finance.

How long does the mortgage contingency last in Pennsylvania?

The mortgage contingency period is a negotiated term — typically 21 to 30 days from execution of the agreement of sale. In competitive markets, buyers sometimes offer shorter contingency periods to make offers more attractive to sellers.

What happens if financing falls through after the mortgage contingency expires?

The buyer may forfeit their earnest money deposit and potentially face additional liability for the seller's damages. This is why completing full underwriting before making offers — rather than relying on pre-approval alone — is critical in competitive markets.

Can a buyer waive the mortgage contingency in Pennsylvania?

Yes — to strengthen offers in competitive situations. Waiving means the buyer agrees to proceed regardless of financing and accepts full financial liability if financing falls through. Should only be done by buyers who have completed full underwriting and are highly confident in their financing status.