What Is a Mortgage Commitment Letter?
A Mortgage Commitment Letter is a written statement prepared by a mortgage lender once your application for a home loan has been approved. This is the final task needed to secure a mortgage from a lending agency and signifies the property is nearly yours.
The Commitment Letter for a mortgage will also detail the final terms and conditions in the approval. This letter also details the type of loan, such as a loan from the Department of Veterans Affairs, people purchasing their first home, etc.
The letter also includes the total dollar amount the purchaser is borrowing, the interest rate, and the repayment plan for your home loan.
How Long Does it Take to Get a Mortgage Commitment Letter?
In order to help speed the home buying process along and to avoid being outbid by another prospective buyer, it is important to be pre-approved for a home loan before shopping for a home. This step also needs to be completed before you will receive a mortgage commitment letter. To begin this process you will want to consider how much you are able to pay each month for your mortgage comfortably.
There are also automated underwriting systems lenders will use to assess your income, bank balances, and approval for a credit check based on the information you provide them, so accuracy is key. Once these items are completed it will usually take between 30 to 45 days before you receive a Mortgage Loan Commitment Letter.
What Happens After a Mortgage Commitment Letter?
Once you receive the approval letter you will need to sign it and send it back to your lending agency within a given timeframe. Often the letter will contain specifics that you will need to complete, such as acquiring insurance for homeowners, fire, flood, or title.
This time is also known as closing and is the point in time during which you will sign your mortgage. This is when the seller will also sign the deed, thus transferring the property to you. However, the trustee will hold the title to the property until you have completely paid off your mortgage.
How to Get Out of a Mortgage Commitment Letter?
If you decide that you do not want to commit to the mortgage, you are not legally bound to sign the Mortgage Commitment Letter before you have signed it. However, this process also applies to the seller, and they are also able to back out of the agreement if the documents have not been signed.
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