A financing contingency, also called a loan or mortgage contingency, is a clause in a purchase agreement that makes the sale conditional on the buyer obtaining a mortgage. It protects the buyer's earnest money if their loan is ultimately denied.
The contingency usually gives the buyer a set number of days to secure loan approval and may specify the loan type, amount, and maximum acceptable interest rate. If the buyer cannot get financing that meets those terms within the window, they can typically cancel and recover their deposit.
Because it introduces risk for the seller, some buyers in competitive markets shorten or waive the financing contingency to strengthen their offer. Waiving it means risking the earnest money if the loan falls through.