Why Is A Mortgage Commitment Letter Important?
A mortgage commitment letter is given by a lender to the buyer and contains an outline of the terms of the mortgage that have been agreed between them. The mortgage commitment letter is also an indication that the mortgage has been approved for a real estate purchase. To the buyer, this is an important step as they can show it to the seller who upon seeing it will know the loan has been approved and you have the required funds for home-buying. It contains information such as the purpose and amount of the loan as well as the loan-term along with lender information, a loan number and expiration date of the commitment letter. There are, in fact, two kinds of mortgage commitment letters, one being a conditional commitment and the other, a final commitment letter. Conditional commitment letters are the most common types and they mean that the lender will fund the mortgage provided the conditions agreed upon are met within a time limit set and agreed by the parties involved. These conditions would vary from lender to lender but typically would include conditions such as the buyer's credit score or income shown at the time of the agreement shouldn't change, the commitment is subject to the appraisal of the property, the buyer must submit document and paperwork as required by the lender, a home inspection test on the property must be passed, the buyer must prove that they can make the down payment required etc. The final commitment letter on the other hand means that there are no conditions to be fulfilled by the buyer and the lender will lend the amount agreed upon. The only condition in a final commitment letter would be a date i.e. if not funded within the stipulated time period the offer may expire and the buyer would need to apply for the loan all over again. You may then wonder how to get this letter? You may need to prequalify by providing some basic information such as your assets, debts due, and current income. The lender may even ask to see your credit report and run a check, review the credit score, and other related information. This will help the lender in ascertaining how much amount you can borrow. Similarly, getting a pre-approval shows to the lender your intent as a serious buyer. After submitting the mortgage application as well as the documents required along with you would need to give some information about the house you want to buy. The home will need to be approved and you would need to sign a purchase agreement as well as get an appraisal done. A title search will be conducted to ensure there are no liens on the house. After all these steps are complete you will get your mortgage commitment letter. If you have received a commitment letter or are due to buy a home and have any confusion or doubt, write to us at LendX Financial in Brampton, Greater Toronto Area.