Asked and AnsweredMy boyfriend and I are interested in buying our first apartment in a new construction condominium. Our mortgage broker tells us we should qualify for a 90% loan, but it will be a close call for the bank. The sponsor wants us to sign a “no contingency” contract. Is that a good idea?
No, it is definitely not a good idea. Even under the best of circumstances, obtaining a loan commitment these days can be challenging. Banks actually read documents now and are surprised by what they are finding. Many folks no longer qualify for financing. Particularly for first time home buyers, who are on the borderline for qualifying for a loan, the contract must contain a mortgage contingency that allows the buyer out of the transaction if the buyer does not qualify for financing. In addition, buyers should also request a “funding contingency” which allows the buyer to exit the deal if the bank issues a mortgage commitment letter, but later withdraws its financing. That can happen.
As long as we’re talking, you should also consider what might happen if your boyfriend and you break up after you purchase the apartment. Who will remain in the apartment and who will be responsible for the carrying costs? For more on ownership issues, see “Love Hurts.”