About Buyer Continguies

The home buying contract is usually contingent upon the buyer obtaining within X-days a written loan commitment from a lending institution.

The contract usually states that the buyer will make a loan application within a few days from the effective date of the contract, and that the buyer will use all diligence to obtain this loan at a reasonable interest rate and terms as defined in the contract. If the financing doesn't come through, then the contract is no longer binding.

If the contract is conditioned on the buyer selling their current residence, the buyer must include this provision in the contract. The seller can either accept or reject the contingency.

Seller acceptance or rejection will depend on the market. If you are in a sellers market, it will likely be rejected if the seller is receiving multiple offers.

If you are in a buyers market, the seller may insert a time-frame in which you must sell your home.

Using Bridge Loans

Some lenders will offer "bridge loans" that can be used to help bridge the gap from the time you sell your existing home to the time that you are ready to buy your next home.

A bridge loan is commonly known as a short term loan that a borrower takes out against their current property to finance the purchase of a new property.

• bridge loans are typically a short-term loan from 6 months or more
• carries higher interest rates
• requires upfront points
  
  you can use the bridge loan to make the down payment and pay for closing costs

Other Financing "Bridges"

You can also consider other financing bridges that can help.

1. using a home equity line on your current home to use for down payment and closing costs. If you have substantial equity, the line can be used to finance your new home.
   
   
2. another option is to borrow against your 401-K plan. Lenders will allow you to use 401-K borrowings as a source of income. Again, the funds can be used for a down payment and closing.