Blocks & Lots

Mortgage Commitment Letter: All you need to know

A mortgage commitment, or a loan commitment, is a document stating that the lender prepared to lend you money as long as certain conditions are met.

What information does a mortgage commitment letter contain?

A mortgage commitment letter usually contains the following information:

  • The type of loan being used (Fixed rate/adjustable rate, FHA/Conventional/VA, Jumbo/Conforming)
  • The amount of money being borrowed
  • The term of the loan (30 years, 15 years)
  • The interest rate assigned to the loan
  • The conditions that need to be met in order for the loan to be approved (if the commitment letter is delivered after underwriting.)

What is the difference between a mortgage commitment and mortgage approval?

A mortgage commitment really means that the lender is committed to trying to get you approved for a mortgage. A mortgage approval means that all the loan underwriting has been completed and the conditions in the mortgage commitment letter have been met.

What are some of the conditions typically stated in a mortgage commitment letter?

  • Providing additional documents needed to verify income, assets or debts
  • Paying off outstanding debts in order to reduce the debt-to-income (DTI) ratio
  • Providing proof of homeowners insurance and/or title insurance
  • Completing a termite inspection of the property being purchased
  • Providing updated copies of bank statements
  • Explaining certain financial withdrawals, transfers or deposits
  • Showing proof that the earnest money deposit check has cleared
  • Verifying employment with a letter from the borrower’s employer