Is The Mortgage Commitment Letter Important?
Part of the home buying process is proving to the seller that you can pay for the home. A mortgage commitment letter can help you with this. If your offer has been accepted on a home and you need the mortgage commitment letter, here is what you need to know.
Why Is the Mortgage Commitment Letter Important?
After your offer on a single family home is accepted, you and the seller have to complete a series of steps to be ready for closing. Obtaining the mortgage commitment letter is one of those tasks you have to complete. The letter basically states that you have completed the entire loan application process and have been approved for the loan to buy the home.
The amount of time it takes to receive the letter can vary by lender, but it could take over a month for your application to be processed. In the letter, you will find the length of the term, the interest rate, and how much you will have to pay each month.
The letter will also detail any conditions the lender has placed on the loan. For instance, you might be required to obtain homeowners insurance before you can close on the home.
It is important to note that the mortgage commitment letter can expire. The expiration date for the letter will be noted on the document. If you do not close on the home before the date, the lender is not obligated to fulfill the loan contract.
What If Your Letter Is About to Expire?
If your mortgage commitment letter is set to expire, you have to take action immediately. Contact your lender and request a revised letter with a new date. The lender will likely extend the letter to a date that is after your scheduled closing date.
Depending on your lender, you might have to submit updated financial documents. The lender will want to verify that you are still qualified to receive a loan. If there were any changes to your financial situation, there is a possibility that your loan could be denied or you might have to meet additional requirements.
There is also a possibility that your interest rate could change. There are also fees that could apply. The seller might be willing to pay the fees if he or she is the reason that the closing is being denied.
In addition to talking to your lender, talk to your real estate agent. He or she knows the importance of the letter and will help keep the purchase of the home on track until closing.