What Is A Loan Commitment Letter?
A mortgage or loan commitment letter is a document issued by a lender that indicates a prospective borrower has been approved for a loan under specific terms and conditions.
Loan commitment letters offer a greater level of commitment by the lender and indicate increased capacity of the borrower to obtain financing. Loan commitments indicate a greater probability of a borrower to secure financing relative to simple pre-approval letter. The issuance of a loan commitment may indicate a borrower has undergone a more in depth review by an underwriter.
Loan commitment letters are subject to specific terms, conditions, and time frames. Loan commitment letters may specify a property. Loan commitments may require an appraisal, indicate specific loan terms, and layout the financial criteria of the borrower.
If the terms, conditions, and time frames are not complied with, the lender may find reason to not issue the loan, particularly if changes occur after the loan commitment was issued.
Depending on the lender and type of financing sought, a lender may charge a fee for a loan commitment.