Transaction Coordination

Mortgage Contingency: How the Financing Contingency Works

What a financing contingency protects, how long it lasts in specific state forms, what actually satisfies it, what to do if the loan falls through, and what changes when a buyer waives it.

Ijharul Islam October 30, 2026 10 min read

A mortgage contingency, or financing contingency, lets the buyer cancel and normally recover the earnest money if, after applying in good faith, they can't get the loan the contract describes by a set date. The period comes from the contract: 17 days by default in C.A.R.'s guides to California's RPA and 45 days in Ohio's statewide form, for example.

More on this topic: Contract to close: process and checklists, every guide in one place.

This guide explains what the clause protects and what it doesn't, the periods in several state forms, why a loan commitment is not the same as clear to close, what to do when financing falls through, and what a buyer gives up by waiving it. Every period below comes from a named form; the numbers in your contract control.

Key takeaways

The contingency protects a buyer who applies promptly and in good faith; it isn't a way out for a change of mind.
Periods vary by form: 17 days in the RPA, 45 days in Ohio, 45 days or 5 business days before closing in Illinois, and fill-in dates in Texas, New York, Massachusetts and Wisconsin.
Most forms are satisfied by a written loan commitment, which can still carry conditions; clear to close comes later.
If the loan falls through, the buyer must usually give written notice, often with the lender's denial, before the deadline.
Waiving the contingency moves the risk of a failed loan, and the earnest money, onto the buyer.

What is a mortgage contingency?

It's the clause that makes the buyer's obligation to close depend on getting financing. A typical one names the loan type and amount, sometimes a maximum interest rate (Wisconsin's WB-11 has fill-ins for a fixed or adjustable rate cap), a date to apply, a date to obtain a commitment, and how the buyer must give notice if the loan isn't available.

It also puts duties on the buyer. New York's bar-association contract requires the buyer to apply promptly, pursue the application diligently and send the seller a copy of the commitment. The Massachusetts MAR forms treat the buyer as having made reasonable efforts only if at least one application went in by the application date and the buyer answered the lender promptly. A buyer who sits on the application may lose the protection.

What does a financing contingency protect, and what doesn't it?

It protects against the lender saying no to a buyer who did everything right: the loan is denied, or isn't offered on the terms the contract describes. It doesn't cover a buyer who changes their mind, who takes on new debt and disqualifies themselves, or who applies late.

Whether a low appraisal is covered depends on the form. Texas splits the two inside its Third Party Financing Addendum (TREC 40-11): Buyer Approval is about the buyer's credit, and Property Approval covers appraisal, insurability and lender-required repairs. California's RPA has a separate appraisal contingency alongside the loan contingency. For the appraisal side, see appraisal gap and low appraisal options.

How long is a mortgage contingency?

There's no standard length. It's the number or date written into the contract, and some forms fill in a default when the blank is empty:

Form	Financing deadline	How the buyer gets out
California RPA (C.A.R.)	17 days after Acceptance by default (C.A.R. guides; check the June 2026 revision)	Cancel in good faith until the loan contingency is removed in writing
Texas TREC 40-11	Buyer Approval: days written in after the Effective Date; Property Approval: 3rd day before closing	Notice plus the lender's written statement of reasons
Ohio statewide contract	45 days from acceptance if blank	Deliver the commitment, or a denial with a termination notice, by then
Illinois Multi-Board 8.0	45 days after acceptance or 5 business days before closing, whichever is earlier	Written rejection served by that date voids the contract
New York bar form	The Commitment Date written in (45 days in the copy we read)	Notice within 5 business days after the Commitment Date
Massachusetts MAR #501/#503	The commitment date written in	Written notice by 5:00 p.m. the next calendar day
Wisconsin WB-11	Days written in after acceptance	Written notice with the lender's rejection or other evidence
Pennsylvania ASR	The commitment date in paragraph 8's box	Per paragraph 8(H), if the buyer elected the contingency

Count the days exactly as the form says, from the right starting point; New York's runs from delivery of the fully executed contract, not acceptance. The state guides have worked examples: California contingency removal deadlines, the Texas option period, Ohio purchase agreement deadlines, the New York contract timeline, the Massachusetts P&S timeline and Wisconsin WB-11 deadlines.

Loan commitment vs clear to close: what satisfies the contingency?

Usually a written loan commitment, which comes before clear to close and may still have conditions attached. The stages buyers hear about:

Stage	What it is	Does it satisfy the contingency?
Prequalification or preapproval	An early look at the buyer's finances; the CFPB says these letters are not guaranteed loan offers	No
Loan commitment	The lender's written commitment to lend, often with conditions	Usually, if the form says so
Clear to close	The underwriter has signed off every condition	Comes later; the contingency may already be gone

The gap between commitment and funding is where the risk shifts. Wisconsin's WB-11 warns that a delivered commitment may contain conditions the buyer must still satisfy, and that delivering it removes the financing contingency and shifts the risk to the buyer if the loan isn't funded. New York's bar form says a commitment conditioned on the lender approving an appraisal doesn't count until the appraisal is approved, but once a commitment issues, the buyer is bound even if the lender later refuses to fund. More on the last step in what clear to close means.

What happens if financing falls through?

If it happens inside the contingency period, the buyer can usually cancel and recover the earnest money, provided they follow the form's notice rules to the letter:

Texas: notice of termination within the Buyer Approval days, with a copy of the lender's written statement of the reasons; the earnest money is refunded. Use TREC's Notice of Buyer's Termination (38-8).
Illinois: a buyer with a written rejection who serves notice by the Financing Contingency Date voids the contract; notice that approval hasn't arrived makes it voidable by either party until approval is delivered.
New York: if every lender denies the application in writing before the Commitment Date, the buyer may cancel with copies of the denials; if no commitment issues, the buyer has 5 business days after that date.
Wisconsin: the buyer delivers written notice with the lender's rejection letters, and, if the seller-financing box is checked, the seller then has 10 days to elect to finance the sale itself.

If the loan fails after the contingency is gone, the buyer has no financing exit left and may be in default. That's when earnest money disputes start, and why the commitment date deserves a reminder days ahead. For the general case, see what happens if you miss a contingency deadline.

Can the seller cancel if the buyer doesn't get a loan commitment?

Several forms give the seller that right, so it's a date the listing side should track too. Ohio's statewide contract lets the seller terminate within 3 days after the loan commitment period ends. Wisconsin's WB-11 lets the seller terminate by written notice any time before receiving the buyer's commitment once the deadline has passed. New York's bar form gives the seller 5 business days after the Commitment Date to cancel if it hasn't seen a commitment, and the buyer 10 business days to cure by delivering one. In Illinois 8.0, if the buyer doesn't apply within 10 business days, the seller has 5 business days to terminate.

Should a buyer waive the mortgage contingency?

Waiving it tells the seller the sale won't fail for lack of a loan. Pennsylvania's Form ASR has offered an explicit waiver choice in paragraph 8(A) since September 1, 2025. Wisconsin's WB-11 lets a buyer write an offer not contingent on financing, in which case the buyer must still deliver verification of funds to close within 7 days if the blank is empty, and access for an appraisal doesn't create a financing contingency.

A buyer who waives and then can't get the loan is in the same position as a buyer who removed the contingency: the earnest money may go to the seller. Buyers who waive usually have the cash to close without the loan, a fully underwritten approval, or a deposit they can afford to lose. A shorter contingency period is often a safer middle ground than none.

What should a TC track on the financing contingency?

The lender's name and the loan application deadline; confirm the application went in.
The commitment or Buyer Approval date, how it's counted and the time of day notice is due (Massachusetts: 5:00 p.m. the next calendar day).
The appraisal date and whether the appraisal is part of the financing contingency or separate.
Any extension, signed as an amendment, and every date that moves with it.
Proof the contingency ended: the commitment delivered, a signed removal or a termination notice.

Closingbird reads the executed contract and fills in the financing dates it finds for you to check, then sends the owner a morning reminder. Its business days skip weekends and US federal holidays only, and deadlines count from acceptance or closing, so for New York's delivery-based Commitment Date or any window that runs from another notice, set a fixed date.

Frequently asked questions

Is a preapproval enough to satisfy a financing contingency?

No. The CFPB says prequalification and preapproval letters are not guaranteed loan offers. Most forms look for a written loan commitment, or a removal signed by the buyer.

What is a typical mortgage contingency period?

There's no national standard. The California RPA defaults to 17 days, Ohio's statewide form to 45, and Illinois 8.0 to 45 days or 5 business days before closing, whichever is earlier.

Does the buyer get the earnest money back if the loan is denied?

Usually, if the denial happens and the buyer gives notice within the contingency period, in the way the form requires. After the contingency ends, the deposit may be at risk.

Can a mortgage contingency be extended?

Yes, if both parties sign an amendment with the new date. A lender's email saying it needs more time doesn't extend anything.

Is the appraisal part of the mortgage contingency?

Sometimes. Texas covers it as Property Approval in the financing addendum; California has a separate appraisal contingency. Check your form.

Can a cash buyer have a financing contingency?

A buyer who plans to pay cash doesn't need one, and forms usually ask instead for proof of funds, such as Wisconsin's 7-day verification for offers not contingent on financing.

Run it in Closingbird

Closingbird puts the loan application, commitment and closing dates on one file and reminds the buyer's agent and lender contact before each one. Start a free trial (14-day free trial, no credit card required) or see pricing.

Sources

Checked in October 2026. Rules and prices change, and many vary by state, so confirm with the source, your state's real estate commission or your broker before you rely on them.

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