Quick answer: A financing condition gives a buyer a defined period to try to arrange satisfactory financing before the agreement becomes firm. Its exact protection depends on the wording, deadlines and facts. A mortgage pre-approval is helpful, but it is not the same as final approval for the buyer and the chosen property.
Last verified: September 15, 2026
What is a financing condition?
In a conditional agreement of purchase and sale, the buyer’s obligation to complete may depend on satisfying or waiving specified conditions within the stated time. The clause should identify the deadline and the method for giving notice. Buyers should not assume every “financing clause” works identically.
Why financing can fail after pre-approval
- The lender’s appraisal is below the purchase price.
- The property type or condition does not meet underwriting requirements.
- Insurance cannot be obtained on acceptable terms.
- The buyer’s income, credit, debts or employment circumstances change.
- The down payment cannot be adequately documented.
- The lender requests information that cannot be supplied before the condition deadline.
Start with OHI’s guide to mortgage pre-approval in Ontario and the guide to a low appraisal.
What should happen during the conditional period?
- Send the accepted agreement and property information to the lender or mortgage broker immediately.
- Respond promptly to document requests.
- Confirm whether an appraisal is needed and when it can be completed.
- Discuss insurability, especially for older, rural or unusual properties.
- Ask what remains outstanding before treating the financing as complete.
- Review the waiver or fulfilment decision with the appropriate professionals before the deadline.
What does waiving the condition mean?
Waiving or fulfilling a condition can make the agreement firm, subject to its full terms. If the buyer later cannot obtain financing, the buyer may still face serious contractual and financial consequences. This is why a waiver should not be treated as routine paperwork.
Can a buyer simply walk away?
Not automatically. The answer depends on the wording, the buyer’s conduct and the circumstances. Conditions often require good-faith efforts and timely notice. Buyers should obtain legal advice before relying on a condition to end an agreement.
Related due diligence
Financing is only one part of the offer. A buyer may also need to consider a home-inspection condition, title issues, insurance, a survey, septic or well due diligence, or condo-document review.
Buyer checklist
Useful OHI guides
Frequently asked questions
How long is a financing condition?
There is no universal period. The deadline is negotiated and should allow enough time for the lender to review the borrower, property, appraisal and supporting documents. Weekends and appraisal availability can affect what is realistic.
Is a lender’s verbal approval enough?
A buyer should ask what has actually been reviewed, what remains outstanding and whether the property has been accepted. Written confirmation can still contain conditions, so it should be read carefully.
Can the seller continue marketing the property?
That depends on the agreement and any escape or continued-marketing clause. Buyers should have their representative and lawyer explain the exact wording rather than assuming the property is entirely off the market.
General information only: Contract wording and legal consequences are fact-specific. This article is not legal, mortgage or financial advice. Buyers should consult their real estate representative, lender or mortgage broker and lawyer.