FHA Loan Clause

FHA LOAN CLAUSE

This FHA Loan Clause (the "Clause") is made effective as of by and between Buyer Name: and Seller Name: concerning the real property located at .

RECITALS

WHEREAS, Buyer intends to obtain mortgage financing insured by the Federal Housing Administration ("FHA") to purchase the Property; and

WHEREAS, Seller and Buyer desire to set forth the express terms, conditions and obligations relating to FHA appraisal, underwriting and mortgagee requirements as they affect the purchase transaction; and

WHEREAS, the parties acknowledge that certain FHA requirements may impose additional conditions on closing, repairs, certifications or indemnities to satisfy the FHA mortgagee and allow mortgage insurance approval.

NOW, THEREFORE

In consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1. DEFINITIONS

For purposes of this Clause, the following terms shall have the meanings set forth below: "FHA" means the Federal Housing Administration; "Mortgagee" means the lender or its successor that issues the FHA-insured mortgage; "Appraisal" means the FHA appraisal required for mortgage insurance approval.

2. FHA LOAN CONDITION

This Clause is conditioned upon Buyer's ability to obtain an FHA-insured mortgage commitment on terms acceptable to Buyer in Buyer's sole and absolute discretion. Buyer shall apply for the FHA mortgage promptly and use commercially reasonable efforts to obtain a written mortgage commitment from the Mortgagee by the Commitment Date: . Buyer shall provide Seller with written notice of approval or disapproval of the FHA mortgage by that date. If Buyer does not obtain approval by the Commitment Date, Buyer may terminate the transaction and recover any deposit in accordance with the underlying purchase agreement.

3. APPRAISAL; FHA CASE NUMBER

Buyer shall order the FHA Appraisal. The appraisal must meet FHA standards and support the agreed purchase price. The parties acknowledge that an appraisal may impose required repairs or conditions. If the Appraisal identifies items that must be remedied as a condition to FHA insurance, Seller shall, at Seller's expense, perform or pay for required repairs as provided in Section 4. FHA Case Number (if available): .

4. REPAIRS AND MORTGAGEE REQUIREMENTS

If the Appraisal or Mortgagee requires repairs, certifications, or corrections to comply with FHA minimum property standards, Seller shall either (a) complete such repairs prior to closing at Seller's expense, with work performed in a commercially reasonable manner and supported by invoices or contractor statements satisfactory to the Mortgagee; or (b) obtain and deliver to Buyer a written agreement from the Mortgagee and/or an escrow arrangement acceptable to Buyer for completion of repairs after closing. The parties agree that cosmetic items not affecting health or safety that are expressly excluded by FHA from required repairs shall not be a condition to closing.

Seller's obligation to complete repairs shall be limited to those items expressly required by the FHA Appraisal or by written Mortgagee requirements. Seller is not obligated to authorize increases in purchase price or make repairs beyond the scope of such requirements unless Seller expressly agrees in writing.

5. CLOSING, FUNDING AND DELAYS

Closing shall occur only after the Mortgagee has provided unconditional commitment for FHA mortgage insurance and all FHA-required repairs, certifications, or escrow arrangements have been satisfied. In the event the Mortgagee imposes additional underwriting conditions after the Commitment Date, Buyer shall notify Seller in writing and the parties shall have fifteen (15) days to agree on a means to satisfy such conditions. If the parties cannot agree within such period, Buyer may elect to terminate and receive a refund of deposits, or proceed to closing if Buyer elects to waive such conditions in writing.

6. SELLER REPRESENTATIONS AND WARRANTIES

Seller represents and warrants that, to Seller's knowledge, the Property is free from defects that would materially impair habitability or render the Property ineligible for FHA insurance, except as expressly disclosed in writing to Buyer. Seller shall cooperate with reasonable requests by Buyer and the Mortgagee for access, documentation, or certifications necessary to obtain FHA mortgage insurance.

7. BUYER OBLIGATIONS

Buyer shall promptly provide the Mortgagee with all information reasonably required for underwriting, cooperate with inspections required by FHA, and notify Seller in writing of any conditions identified by the Appraisal or Mortgagee that Buyer requests Seller to cure. Buyer shall exercise reasonable diligence in seeking FHA approval and shall not unreasonably delay processing of the mortgage.

8. COSTS

Unless otherwise agreed in writing, Seller shall pay for repairs required by the FHA Appraisal up to the amount of . Costs beyond this cap shall be the responsibility of Buyer, unless Seller expressly agrees otherwise in writing.

9. CURE; DEFAULT

If Seller fails to complete required repairs or otherwise satisfy Mortgagee requirements within the timeframes set forth herein, Buyer may (i) terminate this transaction and receive a refund of deposits, or (ii) elect to close subject to an escrow or holdback arrangement acceptable to Buyer and the Mortgagee. Nothing in this Clause shall limit Buyer's rights under the underlying purchase agreement with respect to default, damages or specific performance.

10. NOTICES

All notices required or permitted under this Clause shall be in writing and delivered as provided in the underlying purchase agreement or to the addresses set forth below. Notices sent by the parties in connection with FHA requirements shall include copies to the Mortgagee upon request.

11. GOVERNING LAW

This Clause shall be governed by and construed in accordance with the laws of the state where the Property is located, without regard to principles of conflicts of law.

12. ENTIRE AGREEMENT

This Clause constitutes the entire agreement between the parties with respect to FHA mortgage-related matters and supersedes all prior negotiations and agreements relating thereto. Except as expressly modified herein, all other terms of the underlying purchase agreement remain in full force and effect.

13. SEVERABILITY

If any provision of this Clause is deemed invalid or unenforceable, the remainder of this Clause shall remain in full force and effect and the invalid or unenforceable provision shall be reformed to the extent necessary to make it enforceable and reflect the parties' intent.

14. AMENDMENT; WAIVER; COUNTERPARTS

This Clause may only be amended or modified by a written instrument signed by both parties. No waiver of any provision shall be effective unless in writing and signed by the waiving party. This Clause may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

15. ADDITIONAL TRANSACTION DATA

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