What Is a Mortgage Loan Commitment Date?

The mortgage loan commitment date is an important milestone in the home buying process As a homebuyer, understanding what this date means and how to navigate it can help ensure your purchase goes smoothly.

When you make an offer on a home, your real estate agent will include a mortgage loan commitment date in the purchase agreement also known as the contract. This sets a deadline for you to obtain loan approval from your lender.

What the Mortgage Commitment Date Means

The mortgage loan commitment date gives you a timeframe to secure financing for the home purchase. This date is typically 21 to 45 days after the seller accepts your offer and you enter a purchase agreement.

By the commitment date, your lender must provide you with a loan commitment letter – a written promise that they will provide the mortgage loan subject to certain terms and conditions.

There are two main types of commitment letters:

• Conditional – Given during preapproval, states loan amount you qualify for if conditions are met.

• Firm – Given after formal application, promises to lend a certain amount for a specific property.

Once you receive a firm commitment letter, you will have officially obtained mortgage approval. However, the lender will likely require more documents and information from you before closing.

Why the Commitment Date Matters

This date is so important because it demonstrates to the seller that you are qualified and able to obtain financing to buy their home. As a buyer, having a firm mortgage commitment by the deadline specified in the contract shows you are ready to move forward.

If your lender hasn’t provided a commitment letter by the date outlined in the purchase agreement, the seller could cancel the contract. They may think you don’t actually have the means to buy the property.

As such, you’ll want to take steps to secure a mortgage commitment as far ahead of time as possible. This involves having all required paperwork and financial details ready for your lender.

What Happens If You Miss the Commitment Date

There can be consequences if you fail to meet the terms of the purchase agreement and don’t have a mortgage commitment by the date indicated. Some things that could happen include:

• The seller can cancel the contract and put the home back on the market.

• You may lose your earnest money deposit.

• You can ask for an extension, but the seller must agree to change the date.

• The seller could take legal action against you for not upholding the contract.

Therefore, it is essential to get your loan application completed early so your lender has ample time to process it. Let your loan officer know right away if you anticipate any issues meeting the commitment deadline.

How to Prepare for the Mortgage Commitment

Here are some tips to ensure you obtain loan approval in time to satisfy the commitment date requirement:

• Apply for preapproval – Get preapproved for a loan amount early in the home search process. This shows sellers you can get financing.

• Submit documents quickly – Provide all required financial statements and paperwork to your lender as soon as possible. This includes bank statements, tax returns, pay stubs, and more.

• Avoid major purchases – Don’t make any big purchases like a new car before closing, as that could impact your debt-to-income ratio. Wait until after you’ve secured the mortgage.

• Stay employed – Don’t quit or change jobs before the commitment date. Keep the same income sources your lender used to approve you.

• Keep your credit clean – Don’t open new credit cards or let any payments fall behind. This could hurt your credit score and loan eligibility.

• Save for closing – Make sure you have funds set aside for the down payment, closing costs and other required payments at closing.

• Stay in touch with your lender – Let them know right away if anything comes up that could delay your ability to get approved by the commitment date.

What to Do After Receiving Mortgage Commitment

Once your lender has provided a firm commitment letter, you’re a step closer to closing. But it’s not guaranteed yet. Here’s what to do next:

• Review the final loan details and interest rate to ensure they align with what you expected.

• Sign and return commitment paperwork promptly.

• Work to satisfy any remaining loan conditions outlined in the letter by providing requested documents.

• Continue saving money for your down payment and closing costs.

• Avoid taking on new debts or making major purchases.

• Follow up on any other items your real estate agent says you need to complete before closing.

• Stay on top of requested paperwork from your lender up until the closing date.

While having your mortgage commitment letter is a big hurdle cleared, don’t relax just yet. It’s essential to stay the course so you can sign on the dotted line and get the keys to your new home!

Frequently Asked Questions

What happens if the appraisal comes back low after commitment?

If the appraisal value is lower than the amount you agreed to pay for the home, your lender may not be able to follow through on the loan amount in the commitment letter. You’ll need to discuss options with your lender, such as putting down more money to cover the gap or negotiating a lower price with the seller.

Can the mortgage commitment letter be canceled?

Yes, technically a lender can revoke a mortgage commitment letter if your financial situation changes significantly or you no longer qualify for the loan for some reason. However, this rarely happens as long as you continue meeting the loan conditions.

Do I have to use the lender that provided my commitment letter?

No, you can ultimately choose to go with a different lender up until you sign the final mortgage paperwork at closing. But make sure to compare costs and rates, since you may lose some fees already paid to the original lender.

What if I can’t close by the date in the purchase agreement?

If you need more time to close for any reason, immediately ask your real estate agent to request an extension from the seller. If they agree to push back the closing date, get any date changes documented in writing.

When does my interest rate lock go into effect?

Your interest rate is only formally locked in once you have a firm mortgage commitment letter. The lock period ensures the lender provides the same rate through your closing date, as long as you close on time.

Getting loan commitment by the deadline is an important step in finalizing your home purchase. Stay in close contact with your lender and real estate agent to make sure you have everything ready to buy your new house!