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The Armour Building, 32 Mercer Street, Hackensack, New Jersey 07601


By:  Susan Marra

Home Inspection Contingency

The first contingency to satisfy in the contract is usually the home inspection contingency. A buyer will be given the opportunity to conduct various examinations of the property being purchased, including examinations for physical and structural damage, for the presence of wood-boring insects and radon in unacceptable levels and for other defects. The buyer should retain the services of a professional inspection company which will examine the home and issue a written report. The buyer should, if possible, be present at the time of the inspection. Once the report is issued, the buyer should review it carefully to determine if any major defects are present. Depending on the provisions of the contract, a buyer may have the right to terminate the contract during the inspection contingency time frame if the seller is unable or unwilling to remedy the defects.

Mortgage Commitment

Unless the buyer is purchasing the property for cash, the contract will contain a contingency for the buyer to obtain a loan.  After the contracts are signed, the buyer should immediately begin the process of choosing a lender and applying for a mortgage.

Most often, the buyer is interested in obtaining the lowest rate possible on the loan.  However, the more information the buyer has at his or her disposal, the better. For example, the rate a particular lender charges may be low, but the closing costs the lender requires the buyer to pay may be higher than another lender’s. Thus, the buyer should consider these factors and seek the opinion of others more knowledgeable in the field, if necessary.

There are costs involved in obtaining a mortgage. One very common cost is the application fee. Other costs are credit report fees, appraisal fees, tax service fees, flood searches, commitment fees, lock-in fees and other fees that a lender may charge the borrower in connection with a loan. Except for the application fee and lock-in fee, these costs are normally paid at closing. The lender will, in advance of closing, estimate all the costs involved and give the prospective borrower a disclosure form that sets forth these estimates. This gives the borrower advance notice of what costs he or she might be expected to pay, other than the fees the lender itself is charging. Be advised, however, that these figures are estimates only and are usually different from the actual fees charged.
A note about mortgage contingencies: if the contract contains a mortgage contingency clause, the buyer must remain mindful of that clause’s expiration date. The buyer must remain in touch with his or her attorney to ensure that he or she receives a mortgage commitment prior to the expiration of the contingency.After the buyer has applied and has submitted all the documentation the lender requires, and if the lender has approved the loan, the lender will issue the mortgage commitment.  A mortgage commitment is a promise by the lender that the borrower will receive a loan to finance his or her purchase, subject to certain conditions being met. Usually, obtaining a mortgage commitment takes three to six weeks from the date of the application for the loan. It is important that the buyer keep in contact with the lender on a regular basis prior to issuance of the mortgage commitment to assure that the lender has all information necessary to issue the mortgage commitment. After receipt of the mortgage commitment, the buyer should carefully review it to confirm its terms and conditions. Buyer should also confirm that his or her attorney has received a copy. The buyer and buyer’s attorney will begin complying with all the conditions of the mortgage commitment, and will begin scheduling a closing date. A closing usually occurs shortly after obtaining the mortgage commitment.

Title Searches

The buyer’s attorney will arrange for title searches to be performed to ensure that the seller will obtain good title to the property being sold. The title search includes a search on both the buyer and the seller as to possible judgments against them. The title search is the basis for title insurance, which protects the buyer in the event title is found defective. The buyer’s attorney will also order a survey of the property showing its dimensions and the location of any improvements on the property. The property corners can be staked for an additional fee.

This publication is intended for general information purposes only and does not constitute legal advice. The reader should consult legal counsel to determine how the law may apply to specific situations.