"Is My House Under Contract, or Just Maybe?" The Financing Contingency, Explained

A seller called me three weeks into a contract, a little rattled. The buyer's loan officer had asked for another round of paperwork, and her question was simple: "Does that mean this is falling apart?"

It didn't, in her case. But it's exactly the right question to ask, because most sellers sign a contract assuming it means the sale is locked in, when for a financed buyer, it usually means something closer to "locked in, provided the loan comes through." What actually protects you if it doesn't is a specific paragraph most sellers never read closely: the financing contingency.

The Contingency Is the Default — Not a Buyer Favor

On the standard Virginia REALTORS® contract (Form 600), financing gets its own numbered paragraph, and it isn't a footnote. The form requires the parties to check a box: the contract either is or is not contingent on the buyer securing third-party financing. Here's the part that surprises a lot of sellers — if nobody checks either box, the contract defaults to contingent. Silence favors the buyer, not the seller.

That box being checked is what actually creates the "maybe" in an otherwise binding contract. It's not a courtesy extended to buyers out of habit — it's a real, negotiated term, and like every other term in the contract, its details matter far more than the fact that it exists at all.

What "Pursuing" the Loan Actually Requires

The contract doesn't just give the buyer an open window to shop for a mortgage at their own pace. It defines a specific document — a "Commitment" — that the buyer has to actually produce: a written statement from the lender confirming the buyer applied, paid the required fees, and had their credit, income, assets, and debt verified as meeting underwriting requirements, with nothing further needed from the buyer.

To get there, the buyer is required to make written application within five business days of ratification and to diligently pursue it from there. And the seller isn't left completely in the dark while that's happening — the buyer's lender and agent are authorized to share status updates with the seller's side on request, including specific items the lender still needs.

The Commitment Date: The Deadline That Actually Protects You

This is the part worth reading twice, because it's where a seller's real leverage sits. The contract sets a "Commitment Date" — a deadline, filled in by the parties, by which the buyer has to either produce that Commitment or notify the seller they couldn't get one. If the space is left blank, it defaults to the Settlement Date itself, which tells you how much this particular blank is worth negotiating rather than leaving open.

If that date passes with no Commitment and no notice from the buyer, the contingency doesn't just quietly expire in the buyer's favor — but it doesn't automatically end the deal either. It keeps running until the seller takes action: sending the buyer written notice of intent to terminate. Once that notice goes out, the buyer has exactly three days to either produce a Commitment or prove they can settle without financing — or the contract terminates. In plain terms: past the deadline, the seller has a real button to press. It isn't automatic, but it's there, and it's yours to use.

How Long This Actually Takes, in Real Numbers

The form leaves the Commitment Date and Financing Deadline blank on purpose, because the right number depends on the loan and the lender, not a one-size answer. But it's worth knowing what "normal" actually looks like, from real contracts, not a textbook.

In my experience, a typical financing contingency runs about 21 to 30 days, with the full contract calling for closing somewhere around 30 to 45 days out from ratification. That's the range I see most often, and it's a reasonable one to expect from a well-qualified buyer working with a competent lender.

The fastest I've ever personally seen a loan go from application to a completed closing is seven days. I want to be honest about what that actually took: every single person in that transaction — buyer, lender, title company, both agents — was laser-focused on that one date and moving in lockstep, nothing waiting in a queue, nothing sitting on someone's desk overnight. It's not a pace to expect, and it's certainly not one to promise a seller. It's simply proof of the outer edge of what's possible when everything lines up. The 21-to-45-day range is the honest planning number; seven days is the exception that shows what focused cooperation can do when it has to.

When the Rug Gets Pulled After the Commitment

Occasionally a buyer does everything right — obtains the Commitment, shows it to the seller — and then the lender pulls the financing anyway, sometimes late, sometimes for reasons that have nothing to do with the buyer's honesty. The contract accounts for that too: the buyer has three days from that lender notice to tell the seller in writing they intend to terminate. If the buyer hasn't otherwise defaulted, the deposit goes back to them. It's a narrow, specific escape hatch — not a loophole a buyer can lean on indefinitely.

What Actually Counts as Buyer Default

Financing falling through isn't automatically a "no harm, no foul" situation for the buyer. The contract lists specific ways a buyer can be found in default on the financing terms: failing to apply on time or pursue the loan diligently, failing to lock a rate and then losing eligibility when rates move, ignoring the lender's reasonable requirements, failing to disclose a material change in their financial situation, not having the funds needed to close, taking some action after ratification that torpedoes their own financing, or misrepresenting something to the lender that causes the loan to fall apart. A buyer gets three days to cure a default once notified — but these are exactly the details worth knowing before you're staring at a stalled contract wondering whether the buyer just had bad luck or created the problem themselves.

One Contract, Several Loan Programs

Where the Virginia REALTORS® form handles all of this in one set of paragraphs regardless of loan type, the system I access through Greater Piedmont REALTORS® — built by the Northern Virginia Association of REALTORS® — takes a different approach entirely: a separate, standalone addendum for each loan program. Conventional, FHA, VA, and USDA financing each get their own form, and the differences aren't cosmetic.

Every one of them defines a "Financing Deadline" and gives the parties a choice between two structures: automatic extension, where the contingency quietly rolls forward toward the settlement date unless someone actively pulls the plug, or automatic expiration, where it simply lapses on the deadline unless the buyer acts. Same underlying purpose, opposite defaults — which is exactly why knowing which one is checked matters more than knowing a financing contingency exists at all.

The appraisal piece changes by program too. VA and FHA financing carry a federally mandated appraisal clause built directly into their addenda — the buyer isn't obligated to complete the purchase if the appraised value comes in under the price, with a real out that survives independent of anything else in the contract. USDA financing carries its own version, plus a Rural Housing Guarantee Fee that has to be accounted for separately in the price and financing terms. Conventional financing, by contrast, offers sellers and buyers a genuine choice: a standard appraisal contingency, or an appraisal contingency paired with a buyer gap guaranty, where the buyer agrees upfront to cover part of any shortfall between the appraisal and the sale price. Three of these forms are built to spot wood-destroying insect issues in fences and outbuildings specifically, not just the main structure — a detail that's easy to miss and expensive to discover late.

Removing the Contingency: Two Notices, Two Different Postures

Once a buyer has satisfied their financing, or once a deadline has quietly come and gone, there are two very different notices available, and which one gets used says a lot about who's driving that moment.

A Seller's Notice Requesting Removal of Financing Contingency is seller-initiated. It puts the ball in the buyer's court on the seller's terms: the buyer has three days from delivery to void the contract, or the financing contingency simply expires and the contract stands without it. This is the tool for a seller who's watched a deadline pass and wants clarity rather than an open-ended wait.

A Notice Removing the Financing Contingency works the other direction — it's the buyer voluntarily stepping forward, and it has to come with proof: either an attached loan commitment or evidence of the funds needed to close without one. It's not enough for a buyer to simply say "we're good" — the notice has to carry the paperwork that backs it up.

Knowing both of these exist means a seller isn't just sitting and hoping past a deadline. There's an actual mechanism to force the issue, and it's worth using rather than letting an expired date drift indefinitely out of politeness.

Seller Financing: A Different Animal Entirely

Both the Virginia REALTORS® and Northern Virginia systems also account for the seller stepping into the lender's role directly — the Seller Financing Addendum and its Northern Virginia counterpart. It's a real option in the right situation, but both forms carry the same blunt warning up top: this is subject to complex regulations, and it calls for actual legal advice before signing anything, not a handshake and a payment schedule. It typically comes with its own credit documentation requirements on the buyer's side, its own default and repayment terms, and its own risk profile for the seller now acting as the bank. I'll walk a seller through when this genuinely makes sense — it's rare, but it exists, and it's worth knowing the option is on the table rather than assuming a sale only closes one way.

Where My Standard-Forms Background Actually Helps

This connects to the last two posts in this series — on Time is of the Essence and on what "as-is" really means — because the pattern keeps repeating. Different standard forms handle the same underlying protection in genuinely different ways, and the difference usually lives in a blank line or a checked box, not in the paragraph headline. Years spent on real estate association Standard Forms Committees — vice chair, then chair, on the Northern Virginia Association of REALTORS® committee during my Northern Virginia career — means I've spent real time inside these forms, not just filled them out. When a financing contingency shows up in your contract, I can tell you exactly what deadline is running, what happens if it passes, and what your actual options are — before it becomes a stressful surprise three weeks in.

One Important Disclaimer

I am not an attorney, and nothing in this post is legal advice. What I can offer is direct, hands-on experience with these standard forms and a clear explanation of what your options mean in practice. For legal advice specific to your contract, consult a licensed Virginia real estate attorney.

Wondering what a financing contingency in your own contract actually protects, or whether a direct, all-cash purchase might sidestep the question entirely? Call or text me directly at 540-729-7801, or email Chuck@ChuckCornwell.com. No forms, no call center — just a conversation.