A loan contingency is a way of protecting a buyer from losing their deposit. It means that the purchase of the house is contingent on you getting approved for a mortgage. You usually have a certain number of days in order to obtain a loan approval. A loan approval typically has loan conditions that are initially given with the approval. If you have a loan approval with conditions that does not mean that you have met your loan contingency. This is a very important thing that you need to discuss with your loan officer to make sure they are meeting the deadlines of your contract.
A loan contingency specifies that the contract is contingent on a certain type of loan and for a certain amount. An appraisal contingency is a part of the loan contingency and designed to protect the buyer in case the bank feels the house is not worth what the buyer is paying for it. All loans like Fannie Mae, VA, FHA and USDA loans require an appraisal. The main purpose of financing contingencies is for the protection of the buyer. If the buyer is not approved for the loan within the contingency date, he or she generally will receive their money back if they notify all parties in the right time frame.
