Commitment letters fall into different categories in relation to the stages of the mortgage process and in general they are more conditional at the early stages and become less conditional with time and with conditions being met.
A Conditional commitment letter states that a lender will offer the loan as long as certain conditions are fulfilled. Loans are always conditional in the early stages, but the conditions are cleared progressivelyConditional commitment problematicA Conditional commitment letter states that a lender will offer the loan as long as certain conditions are fulfilled.
Loans are always conditional in the early stages, but the conditions are cleared progressively as the loan moves through underwriting and processing.
Conditional commitments are problematic when the requirements aren’t met in a timely manner. Ultimately, this can lengthen escrow, or even cause a sale transaction to fall through.In some states, language on the sale documentation specifically limits your rights if there are conditions on your loan commitment.
The seller may be able to declare that you’re in default of the agreement, for example, if you don’t properly disclose the specifics of the conditional financing. When you’re in default, you stand to lose your deposit and other out-of-pocket expenses.Handling your loan commitment.
First, review your commitment letter and decide if you have a firm or Conditional commitment. If it’s firm, you can focus your attention on other aspects of your transaction. If it’s conditional, request a list of conditions and do what you can to fulfill them.T
he conditions you can’t control are those related to the appraisal. Lenders today are extremely cautious about the amount that they’ll lend relative to the home’s value. It’s possible to see that the appraisal is subject to underwriting review-which means that the lender can override the appraised value. If you see this condition, open the discussion with your lender immediately.
You’ll want to know how and why this override would be enforced.Ideally, you should present your purchase offer with a firm handshake, not a flimsy one. If that’s not possible, take action to firm up that handshake as soon as you can.