Q: We are potential first-time home buyers. After looking around for many months, we finally have found our "dream house" in a new development. The builder's real estate broker has given us a form contract and has advised us to sign it immediately because there are others who have expressed interest in the house.

However, there are a number of things in that document we do not like. Specifically, it is not clear that we can get out of the contract if we are unable to obtain financing. Are we obligated to sign the builder's contract or do we have the right to make changes to that form?

A: One of these days, savvy new-home buyers will realize that their form purchase and sale contracts are one-sided in favor of the builder and they will modify those documents. In the meantime, if you want to buy that house--and if the builder is unwilling to make changes to its contract--you will either have to sign it or buy something else.

Everything--absolutely everything--in real estate is, or should be, negotiable. If the buyers want to modify the contract, the builder has three basic options: reject it out of hand, accept it as presented or make a counteroffer.

Keep in mind, however, that price alone may not be the only area for negotiation. Other areas include the time of settlement, closing credits to be given by the seller or specific clauses to be added to the contract--such as the financing contingency you want.

Once you have a signed contract to purchase, the negotiations should not end. You should shop around and compare mortgage interest rates--and points--with a number of mortgage lenders in your area. Presumably the real estate agent will give you a name or two of potential lenders. Certainly you should contact them. But don't stop there. Check out at least five lenders to try to get the best rate for your purchase. Then make your decision.

Homeowners insurance will be required by your mortgage lender. Once again, shop around. There are many different kinds of insurance coverage, and you should familiarize yourself with the various policies before signing up with a particular company. Make sure that there is an automatic, annual escalator in the coverage, and make sure that the policy will protect you against most common risks.

If you're buying a newly built house with the help of a real estate agent, no doubt the agent will want to walk you quickly through the entire process. After all, the agent wants the deal to close so that the commission will be paid.

But it's your money. And a lot of it! Take your time and shop around.

Turning specifically to your question, unless you are absolutely positive that you will obtain the necessary financing, which also means that the lender's appraiser will have to be satisfied that the contract price bears a relationship to the market, you must have a financing contingency in your real estate sales contract. Without such a contingency, you could lose your earnest-money deposit, or be sued by the seller for damages.

Let's take the following example: You sign a contract to buy a new house for $190,000, and put down a deposit of $10,000. You want to obtain a 90 percent loan in the amount of $171,000, which means that at settlement (exclusive of closing costs) you will need additional cash in the amount of $9,000 ($19,000 less the deposit of $10,000).

If, after making conscientious efforts to obtain financing from a legitimate mortgage lender, you are unable to obtain a loan of $171,000, what choices do you have?

If the contract is contingent on your obtaining financing within a certain number of days (usually 30 or 60), then you can advise the seller of this. Your purchase contract will be terminated, and the builder will be obligated to return your earnest-money deposit. Make sure, however, that you notify the seller within the time spelled out in the contingency clause.

If there is no such contingency, several things can happen. The builder can make a loan to you directly, although the terms will probably not be as favorable as in the open market. The builder could declare you to be in default, and keep the deposit. The builder could sue you for "specific performance," meaning the builder would ask a judge to require that you purchase the house. Obviously, if you do not have any money, this remedy is impractical for a seller. But many purchasers do have money, yet change their minds after a legally binding contract has been signed by all parties.

Finally, the builder can sue you for damages. If, for example, the builder puts the house back on the market but can only sell it for $175,000, its damages are $15,000 (your agreed price of $190,000 less the $175,000), and the court may award a judgment against you in this amount, plus perhaps carrying costs.

Obviously, when market conditions are favorable, the seller or builder will not sue for damages, but may opt to keep your earnest-money deposit.

So don't enter into the sales contract without a financing contingency. Don't sign under stress or pressure. Your home purchase is probably the largest investment you will ever make, and you do not want to be in the litigation business.

Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.