What Is a Mortgage Commitment?

A mortgage commitment is a legal document issued by a lender stating that they have agreed to issue the borrower the funds requested.

The Conditional Loan Commitment

Most lenders issue conditional loan commitments once the loan has been approved. The conditional commitment is only binding as long as the borrower meets all the conditions stated on the commitment issued by the lender. An example of a condition that might be listed on the commitment is a copy of the borrowers most recent pay stubs, and an appraisal report stating a specific value on the property. Once the borrower has met all the stipulations on the conditional loan commitment, a final mortgage commitment is issued along with authorization to close the loan. 

The Final Loan Commitment

Since this is a binding legal document, once a final commitment is issued the lender is obligated to close the loan, unless the borrower backs out of the loan. This document can also be used as proof to a real estate agent or seller that a potential home buyer is approved for funding and can afford the property he and/or she is trying to purchase. Many real estate agent will not take the time to help you find a piece of property unless you can provide evidence of a mortgage commitment or a letter stating you have been pre-approved for the mortgage.

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