Buying a home comes with lots of paperwork, including the mortgage commitment letter. What is a mortgage commitment letter, and what does it mean for your home-buying journey?
Our team at Altitude Home Loans offers home purchasing assistance in Tucson, AZ. We’ll walk you through the contents of a mortgage commitment letter so you better understand what it means for potential purchases. Call us at 520-500-1010 to learn more, and read on to learn all about how it fits into the process of buying a home.
What Is a Mortgage Commitment Letter?
Most people can’t afford to purchase property without financial assistance. That financial assistance comes in the form of loans from designated lenders. Before providing that assistance, the lender must carefully review multiple aspects of your financial health, including:
- Your credit score
- Your personal finances
- Your income
- Your current assets
After a thorough application review, the lender decides whether or not to pre-approve your application.
So, what is a mortgage commitment letter, and how does it fit into all of this? A mortgage commitment letter is the document the lender sends to you after pre-approving your application for a loan.
Types of Commitment Letters
While mortgage commitment letters are a positive sign, they don’t necessarily represent a resounding “yes” from the lender. There are two types of mortgage commitment letters with different meanings. Before you get your hopes up, review the letter to understand what it means.
- Conditional mortgage commitment: This most common type of commitment letter means that the lender pre-approved your application. However, the lender hasn’t yet underwritten specific loan terms. At most, they’ve drafted potential terms to which they may agree. But you must meet their requirements first.
- Firm mortgage commitment: This letter specifically states the loan sum your lender offers to help you reach closing costs on a property.
Each type has an expiration date. Any terms stated in the letter only hold value until that date. Although only firm mortgage commitments hold any official terms, both letters can show sellers that you’re serious about your offer.
Why Are Commitment Letters Important?
While commitment letters don’t always guarantee loan approval, they do show that the lender considers you a viable candidate for a loan. They can also help you lock in an offer on a property with a seller. Either type of letter can increase your property options and help you get an edge in a competitive buyer’s market.
After you obtain a mortgage commitment letter, you are one step closer to procuring the property you need for your family. It increases your bargaining power in a ruthless real estate market by eliminating purchasing competitors without disposable funds on hand.
Let Altitude Home Loans Assist You
What is a mortgage commitment letter? Ultimately, it is a way for you to improve your purchasing options while getting an edge with sellers. At Altitude Home Loans, our experienced loan officers can help you procure adequate loans that help you cover transfer taxes and other property fees.
Call 520-500-1010 for assistance in your home-buying journey today.