The Mortgage Contingency Defined
The mortgage contingency clause provides protection to the buyer of real property by conditioning the purchase upon being able to successfully obtain a mortgage for the purchase.
With certain exceptions, if the buyer is unable to obtain a mortgage for the purchase, the buyer has the ability to cancel the contract and receive a full refund of the down payment.
While every situation is different, most normal home sales contracts will come with a contingency clause unless the purchase is a cash purchase. Purchases of property with cash or other types of readily available liquid capital (Bitcoin or other crypto currencies, for example) do not require mortgage contingency clauses.
The clause provides for a fixed period of time with specified terms during which the mortgage must be applied for and pursued in good faith. Usually, the contingency period will last anywhere between 30 and 60 days.
If the buyer does not cooperate with the mortgage process and the sellers can show proof of that non-cooperation, the buyer runs the risk of losing the protection of this clause and therefore losing the down payment funds.