Buying a house is a complex and time-consuming thing to do. Getting a mortgage loan requires you to be both responsible and committed. 

A big part of getting a mortgage is the underwriting process. Underwriting exists not only in mortgage loans but also in other loans and insurance.

This process is when the lender evaluates all the information about your loan to determine whether or not they’ll lend you any money. You may or may not receive a mortgage commitment at the end of this process. 

But exactly what is a mortgage commitment? Keep reading to get a plain-English overview of what one is and the two types of mortgage commitments.  

What Is A Mortgage Commitment?

A mortgage commitment letter is a formal document from your mortgage lender. The mortgage commitment letter states that you have passed the underwriting process and are officially approved for the mortgage loan. 

This letter tells you that you have passed the pre-approval process. Getting to this stage of the process is good news for people applying for a mortgage loan. 

Aside from telling you that you have been approved for a mortgage loan, a mortgage commitment letter also tells you the most likely amount a mortgage lender can lend you. 

There are two types of mortgage loan commitment letters. These two are conditional and final. 

Conditional Mortgage Commitment

A conditional mortgage commitment letter approves to lend you a certain amount of loan. However, there are conditions that must be met. Included in a conditional mortgage commitment are the following:

  • Lender’s name
  • Borrower’s name
  • Statement of pre-approval
  • Type of loan
  • Amount of loan
  • Conditions that have to be met before final approval
  • The number of days pre-approval is valid

Final Mortgage Commitment

On the other hand, a final mortgage commitment is when the conditions have been met, and your lender approves you of a specified amount of loan. This mortgage commitment letter contains the following:

  • Lender’s name
  • Borrower’s name
  • Statement of approval for a loan
  • Type of loan
  • Amount of loan
  • Loan term
  • Interest rate
  • Date of commitment
  • Rate lock expiration date
  • Commitment expiration date

How To Get A Mortgage Commitment

There are two stages you need to complete before getting a mortgage commitment letter. These two stages are prequalification and pre-approval.

Prequalification is the process wherein you will be given an idea of how much your house you can afford. For the prequalification process, you must provide basic information to your lender. 

This includes your income, assets, and debts, if you have any. Your mortgage lender will also look at your credit record to review your credit history and score and verify your information. This will help determine how much you can afford. 

The next stage is pre-approval. This stage shows sellers that you are serious about buying a house and that you are eligible to handle a mortgage loan. 

During this stage, your mortgage lender looks at your past and current finances. This is also the stage where you will fill out a mortgage application and submit certain information and supporting documents. This includes bank statements, W-2s, and asset statements. 

After submitting your mortgage application and other important documents, you need to provide information on the home you wish to buy. You will undergo underwriting and loan processing. 

A purchased signed agreement is important before getting the mortgage commitment letter.

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