Ratified Contracts: Basics and Importance in Homebuying
There are a few documents that are very important during a mortgage and homebuying situation, and one of these that’s pertinent to both the buyer and seller is known as a ratified contract. Referring to a contract that’s typically created near the end of a homebuying process, once the details and conditions of the sale have been finalized, this contract is one of a few vital pieces of information that legally binds the sale.
At Primary Residential Mortgage, we’re happy to offer a huge range of mortgage programs for our Branford clients, and also to assist them with many of the documents or similar needs that come up during the mortgage and homebuying process. What is a ratified contract, why is it important, and what else do you need to know about it? This two-part blog series will cover all the pertinent details.
Ratified Contract Basics
A ratified contract refers to a written, legally-binding contract between a buyer and seller of a home. Its most basic information will be the purchase price of the home and the closing costs being paid; other elements may include:
- Inspections and any repairs required before closing day
- Contingencies, such as financing or others, that may allow for termination of the contract prior to closing day
- An expiration date of the contract
In most cases, the ratified contract will come along with a pre-approval letter from your lender, which states that you’ve qualified for funds and the lender is ready to advance said funds for the sale of the home.
For a contract to be considered ratified, it requires three steps:
- Buyer’s offer acceptance: This is the point at which an offer has been accepted by the seller, and they’ve agreed to sell their home
- Seller’s counter-offer: The seller has likely offered some adjustments to the contract details, and this is when they’re accepted
- Signatures of both parties: This is the moment that formally ratifies the contract, and it’s also legally binding
Why Ratified Contracts Are Needed
There are a few specific reasons why ratified contracts are typically required:
- State law: In nearly every state, purchase agreements for a home are not valid unless they are in writing, which is why they are usually ratified.
- Finalizing details: At this time, things like inspections and home repairs may be done, along with other items that need to take place prior to closing day. Also at this time, any contingencies that allow for the contract’s termination are removed.
- FHA loan: For those using the FHA loan program, a ratified contract is a strict requirement, and it must be in place before the FHA can release mortgage funds to the buyer.
For more on ratified contracts and why they’re important during a home sale, or to learn about any of our mortgage rates or quality home loan services in Branford or nearby areas, speak to the team at Primary Residential Mortgage today.
*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.
