In New York, Where the Mortgage Contingency is your best friend

So, you’ve found the perfect colonial in New City or a charming Victorian in Nyack. You’ve made an offer, and it’s been accepted. In the fast-paced Rockland County real estate market, it’s easy to get swept up in the excitement. But before you sign that contract, there is one legal clause you must understand: the Mortgage Contingency.

Under New York State law, this clause is often the only thing standing between you and the loss of your down payment (which is typically 10% of the purchase price).

A mortgage contingency is a provision in a residential real estate contract that makes the deal dependent on the buyer securing a mortgage commitment. If you act in “good faith” but the bank ultimately denies your loan, this clause allows you to cancel the contract and receive a full refund of your down payment.

New York courts are very strict about “good faith.” To use this contingency to exit a deal, you must:

1. Apply promptly: Usually within 5–7 days of receiving a signed contract.
2. Provide truthful information: Any hint that you intentionally sabotaged your loan application (e.g., quitting your job or taking on new debt) could lead to a judge ruling that you breached the contract.

When your attorney reviews the contract, pay close attention to these specific variables:

• The Commitment Date: Typically 30 to 45 days after the contract is signed. This is not your closing date; it is the deadline to show the seller a “Commitment Letter” from your bank.
• Loan Amount and Terms: The contingency should specify the amount you are borrowing (e.g., $500,000) and the type of loan (e.g., 30-year fixed). If you are only approved for a lower amount, the contingency may still protect you.
• The “Passive” Expiration: In NY, if the deadline passes and you haven’t notified the seller in writing that you were denied, you may be deemed to have waived the contingency. This means if your loan fails on day 46, your down payment is at risk.

Many buyers confuse these two. In Rockland County, where home values remain high due to limited inventory, appraisals can sometimes come in lower than the agreed-upon price.

• Mortgage Contingency: Protects you if the bank won’t lend to you (the person).
• Appraisal Contingency: Protects you if the bank won’t lend because the house isn’t worth the price.

Pro Tip: In New York, a low appraisal often “triggers” the mortgage contingency. If the bank refuses to issue a commitment because the house appraised for less than the purchase price, you can usually exercise your right to cancel.

Yes, provided you have a mortgage contingency clause and you notified the seller in writing before the commitment deadline. If you waived the contingency or missed the deadline, the seller may legally keep your deposit.

While negotiable, the standard period is 30 to 60 days. In 2026’s competitive market, some sellers may push for a shorter 30-day window.

If you need more time, your attorney must request a written extension. Never assume the seller is “okay with it” just because they haven’t complained.

With interest rates stabilizing in the low 6% range this year, competition in towns like Nanuet, Pearl River, and Suffern remains steady. Some buyers are tempted to waive their mortgage contingency to make their offer more “cash-like” and attractive.

Our advice? Unless you have the full purchase price sitting in a bank account, waiving this protection is a massive risk. Speak with a local Rockland County real estate attorney to ensure your contract reflects your actual financial situation.