Removing the loan contingency on a home purchase is a significant step and shows the seller that the buyer is committed to going through with the transaction. After the initial underwriting review, a loan approval is issued based on certain conditions being satisfied. It is the scope of these conditions that typically influence a buyer’s comfort level in removing the loan contingency, and some buyers are never comfortable until they know for sure that the loan is fully approved. The problem with this is that a loan is always going to have conditions, even up until the sale records.
In a best-case scenario, the conditions needed from the buyer or a third party (tax transcripts, written verification of employment, etc.) are minor and nothing that will likely cause an issue with the approval. A lender should review these with the buyer and set the right expectation. Though a loan is never fully guaranteed, removing a loan contingency is typically reasonable after the initial approval is issued. And once a clear to close is issued, most of the buyer’s conditions have been satisfied and the loan is ready for loan documents to be signed. However, if a buyer takes on more debt, wires funds due at closing from an unverified account, or quits a job after the clear to close but before the loan is funded, this will cause an issue!
The only party that should be making the decision to remove any contingency is the buyer, but it is the job of the lender to provide advice regarding the loan approval and outstanding conditions. I continually remind myself that, though I deal with this daily, it is extremely foreign to a lot of buyers and many need help navigating the process.
