When applying for a mortgage, one of the most important documents that borrowers are required to provide is a contract or purchase agreement for the property they wish to finance. As a professional, I have frequently encountered this question: do mortgage lenders actually check these contracts?
The simple answer is yes, mortgage lenders do indeed check contracts. In fact, they carefully scrutinize every aspect of the contract to ensure that it meets certain standards and that there are no hidden risks associated with the property purchase.
Here are some of the key areas that mortgage lenders will typically examine when reviewing a contract:
1. Purchase price: The lender will want to ensure that the purchase price of the property is reasonable and in line with the local real estate market. This helps to mitigate the risk of the property being overvalued and thus the borrower defaulting on the mortgage.
2. Contingencies: Most standard real estate contracts contain contingencies that allow the buyer to back out of the transaction if certain agreed-upon conditions are not met. Lenders will review these contingencies to ensure that they are reasonable and do not pose an undue risk to their investment.
3. Closing date: The closing date is the date by which the sale must be completed. Lenders will ensure that this date is realistic and that there is enough time for all necessary paperwork and inspections to be completed.
4. Property condition: The lender will also review the contract for any clauses or conditions related to the condition of the property. This helps to ensure that the property is in good shape and that the borrower will not face any unforeseen repairs or expenses.
5. Financing contingencies: Finally, lenders will examine the contract to ensure that all necessary financing contingencies are in place. This includes verifying that the borrower can secure financing for the property and that the loan terms are acceptable.
So, if you are in the process of applying for a mortgage and are wondering whether your contract will be thoroughly vetted by the lender, the answer is a resounding „yes.“ By reviewing every aspect of the contract, lenders are able to mitigate their risk and ensure that the borrower is making a sound investment.