Mortgage Commitment Letters
Mortgage Loan Commitment And Mortgage Prequalification Letter Myths
Every day at my office I get calls from Realtors with whom I work asking me for a prequalification letter for this client or that. A prequalification letter is nothing more than a letter on a mortgage company’s letterhead. It is not a mortgage commitment.
If you have ever read any mortgage company reviews, you will see that Just because a loan officer or lender issues you a prequalification letter, it does not mean you will be approved for a mortgage loan.
The mortgage prequalification letter states that the loan officer has reviewed the home buyer’s credit, income, work history etc and that the borrower is “Pre-Qualified” for a mortgage with a certain dollar amount.
Notice that the word is “PRE-qualified”. Pre meaning before the actual qualification.
Almost always, these letters state that the pre-qualification is not a mortgage commitment and that a commitment may only be issued after a complete loan package has been reviewed.
What does this mean?
What it means is that a pre-qualification letter is not worth the
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paper it’s written on.
It is non binding, and the lender or broker is in no way obligated to issue a mortgage to you.
A mortgage loan commitment on the other hand is a document which virtually guarantees that you will receive a mortgage as long as you provide the lender with all the documentation and conditions required.
Your loan has been reviewed by an underwriter and is approved.
A mortgage loan commitment is binding and the lender must issue the mortgage if you fulfill all the requirements. After the lender issues a commitment letter to the borrower it has to fund that loan. It can not “change its mind” as to weather they want to give you the money or not.
So why is this important?
First of all, loan officers write pre-approval letters all the time at their own discretion. It’s nothing more than his or her opinion.
So the bottom line is that you may have been pre-qualified for mortgage, but when it comes right down to it, you may not be able to actually get approved for a loan.
I’ve seen cases where clients have gotten pre-approval letters, gone out and put a deposit on a home, packed their furniture, rented a moving van only to find out at the last minute that they were turned down for the loan.
This is a terrible crisis. They lost their home, their deposit money, everything. And on top of it, they have nowhere to sleep.
Avoid all this and get a Mortgage Loan Commitment from the start.
Not only will you avoid the possible nightmare scenario that I outlined above, but you will also have more bargaining power.
When you negotiate for your new home with a seller, having a mortgage loan commitment in your hand is virtually the same as being a cash buyer.
This gives you much more leverage than the buyer who merely has a pre-qualification letter. It says to the seller that you mean business and it presents virtually zero risk to the seller.
A mortgage loan commitment will help you win the home over a competitive buyer and can also help you negotiate a lower price for the home.
In my opinion the best place to go for a loan commitment is LendingTree Mortgage Loans .
Lending Tree is great because they are a one stop shop and they can have up to four excellent loan offers in front of you very quickly. Getting a Mortgage Loan Commitment through Lending Tree, makes the process a piece of cake.
To get your mortgage commitment letter right now go to LendingTree Mortgage Loans
