Commercial Real Estate Dictionary

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Commitment letter

Definitions of Commitment letter
  • A commitment letter is an official document from a lender indicating approval of the borrower and the terms and conditions of the prospective loan.
    Once the interested buyer got a commitment letter from the commercial bank to acquire the property, we felt good about being able to complete the transaction.


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.


        

Real Estate Terms

1. How much cash will be required to make your mortgage payments? Debt Service >>


2. Who can you go to to finance your construction or development project? Construction Lender >>


3. What professional can assist you in maximizing the value of your investment property? Asset Manager >>


4. How can we assess future commitment to infrastructure to support our communities and future development? Capital Improvements Projects >>


5. What measurement indicates if a property's financial performance can cover its debt? DSCR >>


6. What part of a city is the center of urban economic development? CBD >>


7. What allows property owners and professionals to estimate the market value of a commercial property? Comparable Property >>


8. What can landords do to entice prospective tenants? Concession >>


9. What critical factor do stores depend on to drive traffic? Anchor Tenant >>


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