Financing Contingency

Washington Financing Contingencies (NWMLS Form 22A) ## How the Financing Contingency Works NWMLS Form 22A (Financing Addendum) is the standard form used to incorporate a financing contingency into a Washington residential purchase. Form 22A specifies: - Loan amount - Loan type (conventional, FHA, VA, USDA, or other) - Maximum interest rate the buyer will accept - Maximum loan fee the buyer will accept These parameters define the scope of the buyer's financing obligation. The contingency is conditioned on obtaining a loan meeting ALL the specified terms — not just any financing. ## Exercising the Contingency If the buyer is unable to obtain financing meeting the specified terms despite a good-faith effort, the buyer may terminate the transaction and recover their earnest money in full, provided they do so within the contingency period. "Good faith effort" is critical. A buyer who: - Deliberately avoids applying for a loan - Makes a major purchase that damages their credit after application - Quits their job after contract execution - Provides false information to the lender ...has NOT made a good faith effort and cannot invoke the financing contingency protection. ## Appraisal and Form 22AA The financing contingency interacts with the appraisal in an important way. If the property appraises below the purchase price, the lender will typically fund only the LTV ratio based on the appraised value, not the contract price. NWMLS Form 22AA (Appraisal Addendum) addresses this separately — it gives the buyer the right to terminate if the property appraises below the purchase price. Without Form 22AA, the financing contingency alone may not protect a buyer from being required to make up an appraisal gap with additional cash (because a…