What happens if I waive my financing contingency and my loan falls through?

If your financing falls through after waiving the financing contingency, you may lose your earnest money and in some cases face additional liability depending on the terms of your contract. Even with a preapproval letter, financing can fall through if your employment situation changes, if the property has issues that affect loan eligibility, or if underwriting uncovers something unexpected.

Should I waive my financing contingency to make my offer more competitive?

Only after talking to your loan officer first. Waiving the financing contingency makes your offer more attractive to the seller but shifts significant risk to you. Before waiving, your loan officer needs to confirm the closing timeline is realistic, the property doesn't have known financing issues, and your preapproval is solid enough to support the waiver. A pre-underwritten approval provides a much stronger basis for waiving a financing contingency than a standard preapproval letter.

What is non-refundable earnest money?

Non-refundable earnest money is a deposit that the buyer agrees to forfeit to the seller if they do not complete the purchase, regardless of the reason. Unlike standard earnest money which may be refundable under certain contingency conditions, non-refundable earnest money is at risk from the moment the offer is accepted. Always understand the terms of your contract before agreeing to non-refundable earnest money.

Can I waive the appraisal contingency if I have enough cash to cover a low appraisal?

Yes, if you have sufficient cash reserves to cover the potential gap between the appraised value and the purchase price, waiving the appraisal contingency may be a reasonable calculated risk. However you should discuss the specific property, market conditions, and your financial situation with your loan officer and real estate agent before making that decision. Appraisal risk is higher on unique properties or in markets with limited comparable sales.

When should I talk to my loan officer about waiving contingencies?

Before submitting the offer — not after. Competitive offer situations move fast and your loan officer needs to be in the loop throughout your home search, not just when you are ready to write an offer. The more your loan officer knows about the properties you are considering, the better positioned they are to advise you quickly when the right home comes along and contingency decisions need to be made.

Waiving Your Financing Contingency: What Washington Homebuyers Need to Know

Q: What is a pre-underwritten approval and why does it matter for waiving contingencies?

A pre-underwritten approval means an underwriter has already reviewed your income, assets, and credit before you find a home. This provides a much stronger basis for waiving a financing contingency than a standard preapproval letter, which is typically issued by a loan officer without full underwriter review. If your preapproval hasn't gone through underwriting, waiving the financing contingency carries more risk.

In competitive markets, buyers sometimes feel pressure to waive contingencies to make their offer stand out. Before you do — whether it’s the financing contingency, the appraisal contingency, or both — here’s what you need to understand about the risks involved.

What Is a Financing Contingency?

A financing contingency is a clause in your purchase and sale agreement that gives you the right to exit the transaction without losing your earnest money if you are unable to obtain financing. It is one of the primary protections available to a buyer — and one of the first things sellers ask buyers to waive in a competitive offer situation.

When you waive the financing contingency, you are telling the seller that you will proceed with the purchase regardless of whether your loan is approved. If your financing falls through after waiving this contingency, you may lose your earnest money — and in some cases face additional liability depending on the terms of your contract.

What Is an Appraisal Contingency?

An appraisal contingency protects you if the property appraises for less than the purchase price. Without it, if the appraisal comes in low, you are generally obligated to either make up the difference in cash between the appraised value and the purchase price, renegotiate with the seller, or lose your earnest money if you walk away.

Appraised values are based on comparable sales — similar homes that have recently sold and closed in the same area. In fast-moving markets, appraised values can lag behind current prices because they rely on closed sales data. If the property is unique or there are few comparable sales available, the appraisal risk is higher. Waiving the appraisal contingency means accepting that risk entirely.

Appraisal Guide for Washington Homebuyers How appraisals work and what your options are when the value comes in low.

The Real Risk of Waiving Contingencies

Waiving contingencies makes your offer more attractive to the seller — but it shifts risk from the seller to you. Before waiving any contingency, it’s worth understanding exactly what you’re giving up and under what circumstances things could go wrong.

Waiving the financing contingency. Even with a preapproval letter, financing can fall through — if your employment situation changes, if the property has issues that affect eligibility, or if underwriting uncovers something that wasn’t anticipated. Without a financing contingency, you may have no contractual right to exit and could lose your earnest money.

Waiving the appraisal contingency. If the appraisal comes in below the purchase price, you are responsible for making up the gap in cash. Everything tied to loan-to-value — your rate, mortgage insurance, and underwriting guidelines — is based on the appraised value, not the price you agreed to pay. Make sure you have the cash reserves to cover a potential shortfall before waiving this contingency.

Non-refundable earnest money. Some offers include earnest money that is non-refundable from day one. This is a significant commitment — understand the terms of your contract before agreeing to non-refundable earnest money.

Talk to Your Loan Officer Before You Waive Anything

This is the most important thing on this page. Before submitting any offer that waives the financing contingency, the appraisal contingency, or includes non-refundable earnest money — call your loan officer. Not after. Before.

Even if you have a preapproval letter in hand, your loan officer needs to confirm:

The closing timeline is realistic. Can the loan actually close in the timeframe the seller is requesting? A tight closing date with a waived financing contingency is a high-risk combination.

The property doesn’t have known issues. Some property types and conditions create financing complications — certain condo projects, properties with deferred maintenance, or homes with specific features that affect appraisal eligibility. Your loan officer can flag these before you’re under contract.

Your preapproval is solid enough to support the waiver. A pre-underwritten approval — where an underwriter has already reviewed your file — provides a much stronger basis for waiving a financing contingency than a standard preapproval letter. If your preapproval hasn’t gone through underwriting, waiving the financing contingency carries more risk.

In the heat of the moment: Competitive offer situations move fast and emotions run high. Keep your loan officer in the loop throughout your search — not just when you’re ready to write an offer. The more they know about the properties you’re considering, the better positioned they are to advise you quickly when the right home comes along.

Thinking About Waiving a Contingency?

Don’t do it without talking to your loan officer first. I’ve helped Washington State buyers navigate competitive offer situations for over 25 years — including knowing when waiving a contingency is a reasonable calculated risk and when it isn’t.

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