Addendum

TREC 40-11 — Third Party Financing Addendum

Establishes the terms and conditions for third party financing (conventional, FHA, VA, USDA, Texas Veterans, reverse mortgage, or other lender financing). Creates financing contingencies that protect the buyer if they cannot obtain loan approval. Required whenever the buyer is obtaining any type of third party financing.

Source: TREC
Form Number: 40-11
Category: Addendum
Revised: November 4, 2024

Used For

Residential Sales, Farm & Ranch, Vacant Land

Form Outline

The TREC 40-11 form is organized into the following sections:

  1. Property Identification
    Must reference the same property address as the underlying sales contract.
  2. 1. Type of Financing and Duty to Apply and Obtain Approval
    Buyer must apply promptly for all financing described below and make every reasonable effort to obtain approval, including furnishing all information and documents required by the lender.
  3. 1A. Conventional Financing
    Non-government first and/or second mortgage loan terms. PMI premium is excluded from the principal amount.
  4. 1B. Texas Veterans Loan
    Loan from the Texas Veterans Land Board. Interest rate is set by the VLB, not negotiated by the parties. This is a state program, distinct from federal VA loans.
  5. 1C. FHA Insured Financing
    FHA-insured loan backed by the Federal Housing Administration. Loan amount and amortization period are minimums. MIP is excluded from principal. Triggers Paragraph 4 protections.
  6. 1D. VA Guaranteed Financing
    Loan guaranteed by the Department of Veterans Affairs. VA Funding Fee is excluded from the principal. Triggers Paragraph 4 protections including VA reasonable value provisions.
  7. 1E. USDA Guaranteed Financing
    Loan guaranteed by the U.S. Department of Agriculture for eligible rural properties and buyers who meet income limits. USDA Funding Fee is excluded from the principal. Does NOT trigger Paragraph 4 protections.
  8. 1F. Reverse Mortgage Financing
    Home Equity Conversion Mortgage (HECM) for buyers aged 62 and older. PMI and other costs excluded from the principal. If FHA-insured, triggers Paragraph 4 protections.
  9. 1G. Other Financing
    For any loan type not covered by sections A-F (portfolio loans, credit union loans, hard money, bridge loans). Requires naming the specific lender. Includes an option for buyer to waive Paragraph 2B termination rights.
  10. 2. Approval of Financing
    Financing approval requires both Buyer Approval (2A) and Property Approval (2B). Time is of the essence and strict compliance with all deadlines is required.
  11. 2A. Buyer Approval
    Whether the contract is contingent on the buyer being personally approved for the loan. If the contingency applies, the buyer has a specified number of days to terminate if they cannot obtain approval. Termination requires both written notice and a lender denial letter.
  12. 2B. Property Approval
    If the lender determines the property does not satisfy underwriting requirements (appraisal, insurability, required repairs), the buyer may terminate on or before the 3rd day before the Closing Date. Requires both written notice and a lender statement. The 3-day requirement does NOT apply to FHA/VA terminations under Paragraph 4.
  13. 3. Security
    Standard provision requiring each promissory note to be secured by vendor's and deed of trust liens if the lender requires. The title company and lender handle this at closing.
  14. 4. FHA/VA Required Provision
    Federally mandated provision for FHA and VA loans. Overrides all other contract provisions. Buyer is not obligated to purchase or forfeit earnest money if the FHA/VA appraisal is below the specified amount. The 3-day notice requirement from Paragraph 2B does NOT apply here.
  15. 5. Authorization to Release Information
    Buyer authorizes the lender to share financing status with the seller and representatives. Both parties authorize the lender, title company, and escrow agent to share closing disclosures and settlement statements with brokers and agents.

How RaiderX Agents Use This Form

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