Which of the following best describes mortgage contingency in a purchase contract?

• A. It guarantees mortgage approval.
• B. It requires the seller to obtain financing.
• C. It allows termination or renegotiation if financing is not obtained on acceptable terms.
• D. It has no impact on the closing timeline.

Answer: (C)

Mortgage contingency is a clause in a purchase contract that gives the buyer a way out or a path to renegotiate if they cannot obtain financing on terms they find acceptable by a specified deadline. It protects the buyer from being forced to close without a loan and keeps the seller from being stuck with a buyer who may not qualify. It does not guarantee loan approval, and it does not require the seller to arrange financing. Because the contract hinges on the outcome of the buyer’s financing, this contingency directly influences the closing timeline: if financing isn’t obtained on acceptable terms by the deadline, the buyer can terminate or renegotiate, potentially delaying or canceling the close; if financing is obtained, the deal proceeds toward closing.