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Sample Mortgage Loan Commitment Letter

Discussion in 'Mortgage Lenders' started by Moe, Feb 16, 2011.

  1. Moe

    Moe Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    The mortgage loan commitment letter is one of the final documents issued by a lender in the mortgage application process. It is through the mortgage loan commitment letter that a bank either approves or denies a mortgage application.

    In today’s ailing economy, it is important to be fully aware of the terms specified in a mortgage commitment letter.

    Understanding the components can help a borrower make timely payments. Given that the letter addresses all of the liabilities associated with the mortgage loan, it is crucial that one be fully aware off all of the obligations included. For instance, at times some readers neglect the liabilities associated with flood insurance or mortgage insurance.

    FYI: the letter is a PDF that is attached to this thread at the bottomthat you can download

    To break down some of the basic components of a mortgage loan commitment letter:

    • the first portion usually congratulates the recipient for obtaining a mortgage,after all, this letter can signify the opportunity for a person to obtain his or her first home
    • after that, basic terms specify the loan amount, loan type, loan term and interest rate. Given that these are usually the basic components of a mortgage, it is appropriate that these are listed at the beginning of a letter
    • following these specifications are the details pertaining to monthly payments, which include principal and interest. In some cases, interest rates can be fixed. However, under adjustable rate mortgages, interest rates can vary from year to year.
    It should be noted that a mortgage loan commitment letter does not actually guarantee that the borrower will receive the loan. There are additional considerations, including closing costs that must be finalized so that each party knows who is responsible for the closing fees. It is also at this time that any final terms are clarified, such as credit approval and legal compliance.

    In some rare cases, a mortgage commitment letter will simply congratulate a borrower on his or her approval of a loan. It is then necessary for the borrower to schedule a meeting with the lender to verify all of the terms. This approach is usually taken for those who have no familiarity with the mortgage industry. At times, clients prefer to have the loan terms explained to them in person to avoid any confusion.

    Ultimately, the receipt of a mortgage commitment letter is a positive indication for a borrower. Not only does the borrower have the opportunity to begin establishing equity but the borrower is also now able to build a credit rating. When reading a mortgage commitment letter, it is crucial that one understand the basic structure and terms specified. Again, remember that the actual letter is not a contract but merely an update on the status of an application.

    Please be aware that the final approval of the mortgage application is made official upon closing. This letter is NOT a contract or promise to give you a loan.

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