Buying a Home? Why a Mortgage Commitment Letter is Key
You’ve figured out your price range. You’ve gotten your pre-approval letter. You’ve picked out your dream home. As a future homeowner, you want home sellers and real estate agents to view you as a serious buyer. A mortgage commitment letter can help you reach that goal.
What is a Mortgage Commitment Letter?
A mortgage commitment letter is an official document from your mortgage lender confirming that they’ve approved you for a home loan—it’s also known as an approval letter. You’ll usually receive this document after you’ve completed your pre-approval process. It signals that you’ve gone through the underwriting process and are ready to buy a home.
Pre-approval is an important first step since many sellers won’t consider you without this confirmation (unless you’re a cash buyer).
How Do You Get an Approval Letter?
1. Pre-approval
Most real estate sites will allow you to go through a quick prequalification, but this process usually isn’t a good indication of how much house you can afford. You’ll have to provide information about your income, assets, down payment, and debts. However, this is a superficial overview.
Instead, you’re better off going through a lender like Champions Mortgage—we provide you with a real pre-approval letter. Our lenders are required to take a deeper look into your finances and give you a realistic overview of what you can afford. You’ll need to submit bank statements, W-2s, and other financial documents. Your lender will also have to run a credit report to see your payment history and credit score.
2. Submit information on the home you wish to buy
Before you can receive a mortgage commitment letter, a few things need to happen:
Your lender needs to approve you and the home you want to buy.
You need to sign and submit a purchase agreement.
The home needs to undergo an appraisal and title search.
3. Receive your approval letter
Once you’ve completed all the requirements and you’re approved for your dream home, your lender will provide you with your mortgage commitment letter. Success! The letter will include the specific information about your loan, like the loan amount, purpose, terms, and what type of mortgage you’re getting (such as an FHA or conventional mortgage).
Be mindful of whether you’re receiving a conditional or final approval.
Conditional vs. Final Approval
A conditional commitment letter approves you for a certain amount as long as you meet specific conditions within a certain time period. For example, your lender might require you to have proof of a homeowner’s insurance policy.
A final commitment letter promises you a specific loan amount without any conditions attached. You’ll often receive this letter once you’ve met all the previous conditions your lender has set for you.
Remember to meet your conditions in the necessary time frame. Otherwise, a delay can increase how long it takes to purchase your home—or the sale might fall through altogether.
Secure Your Dream Home
A final mortgage commitment letter provides you with the security you need to successfully purchase a home. But the process all starts with a great mortgage lender that provides you with the efficiency and care you need to get through pre-approval. At Champions Mortgage, we provide just that. To secure your dream home, be sure to give us a call at 855-853-1522.