December 26, 2018
The Mortgage Commitment Letter—and its Expiration Date
There are a number of steps to the real estate transaction process, which end with closing, which is where we at Topouzis & Associates, P.C. help usher title in a property from seller to buyer. A few of these steps are dictated by the sort of payment a buyer intends to make on the property. If, as in the typical situation for buying a home, a prospective buyer intends to secure funding through a lender, they will need to get pre-qualification, pre-approval, and, most importantly, a mortgage commitment letter—in that order—from their lender.
Whereas a pre-qualification is a very informal situation, and can be based on just a conversation between a loan officer and a prospective buyer, and a pre-approval takes the formality a step further by including a credit report, a mortgage commitment letter is a truly formal step in the process. It is a promise that the buyer in question has secured a loan from the lender, and that an underwriter has done due diligence to ensure that the buyer is financially secure enough to take on such a loan.
When we discuss this stage with prospective buyers, from time to time one will assume that this means that now they are themselves locked in to going through with the transaction in question. Not so. The mortgage commitment letter simply means that the lender is supplying the certainty necessary for a seller to go to closing secure in the knowledge that the buyer will not have to back out for lack of funds. But the buyer may still choose not to take title at closing, for whatever reason (they will have to be willing to deal with the drawbacks of breaking the real estate contract, however, should all contingencies in that agreement have been met by the closing date).
While the length of time a commitment letter remains valid will vary based on time and place, the standard amount of time is in the neighborhood of 30 days. This length of commitment from the lender will be enumerated in the document itself.
Once the long-awaited closing date arrives, we’ll be at the closing to help the process go smoothly. Here at Topouzis & Associates, P.C., we provide title insurance to back our title services. The policies we connect you with provide peace of mind that a new home’s title will not be subject to any nasty surprises. Whether you’re looking to engage in the market in Providence, Rhode Island; Boca Raton, Florida; or Peabody, Massachusetts, feel free to contact us for more information.