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Signed commitment letter

hello it's Charles Cherne and this is the ask Charles journey series many realtors serving buyers and sellers in cambridge and somerville massachusetts today's question is what is the mortgage commitment so the mortgage commitment is a letter from the home lender to the home buyer that commits the lender to providing the buyer a mortgage loan for a given property and the mortgage commitment is an essential piece to the equation of a home purchase so let's consider an example a typical time line would look something like this on day one there is an accepted offer for the buyer and then the offer accept it includes a home inspection contingency and the home inspection contingency is resolved and the home inspection is completed by say day 7 and the buyer is moving forward in the transaction on say day 7 8 9 or 10 the purchase and sale agreement is signed the P and s as we call it for short is the binding agreement that binds buyer to seller and replaces the signed accepted offer in the transaction so when that purchase and sale agreement is signed typically the only contingency that survives is the mortgage contingency and so the reason that that's the case is the lender needs some time typically three to four weeks to issue the mortgage commitment to give the buyer of the letter that confirms the lender will give the buyer the loan to purchase the property on the closing date so in this example I'm giving imagine that the offer is accepted on February 1st that the home inspection contingency is resolved on say February 7th and the purchase and sale agreement replacing the signed offer binding buyer to seller is signed on February 10th now the appraiser is sent to the property to complete the appraisal report and the lender begins to gather information for the in order to be able to issue a mortgage commitment a letter saying they will give the buyer the loan for the closing as the mortgage commitment date approaches and again in this example if it's a three to four weeks after the purchase and sale is signed on February 8th 9th or 10th we would imagine then that the mortgage commitment is going to be due sometime in March say for example March 8 ahead of say a closing date of March 15th so as you're marching closer to that commitment date the lender typically is knocking off conditions that they need to satisfy to give the buyer the loan they need to for example check that the income that the buyer is reporting is confirmed by their tax returns they may need to confirm specific addresses the buyer has lived at over time so the commitment is always conditional from the outset but as you're marching towards a clean commitment on the commitment date the lender is checking off conditions that they feel they need to meet to be satisfied that the loan can be approved of course the appraisal is an essential component here the lender sends an appraiser a licensed appraiser to the property to complete an appraisal report and they'd like to know in the appraisers report what the property is worth so that they're comfortable giving the buyer a loan to purchase the property so we understand that the mortgage commitment is an essential piece to the process of the transaction completing itself now what happens if you approach the mortgage commitment date and the lender still needs more time well what happens is is there is a commitment extension and this is an extension that's in writing the norm in the cambridge and somerville market where I work as an agent is for the buyers real estate attorney to request an extension of the sellers real estate attorney and that request is made in writing and if it's agreed to it is executed usually through the attorneys in writing so you ask yourself why would the seller grant an extension say in this example it could be March 8th and it turns out that the lender needs a couple more business days for the mortgage commitment clean commitment to be issued the reason that typically an extension request is granted is everyone is seeking to arrive at the same objective which is the closing the closing date in this example is March 15th and so if I'm March 8th the lender needs two extra days to get the mortgage commitment to the buyer you'd expect the seller on the listing agent for the seller and the seller's attorney all to agree that it's a wise idea to grant the extension because everyone wants to get to that closing on schedule on March 15th and if for some reason the lender needs more time to get the commitment to the buyer you granted otherwise the seller would have to release the buyer from the transaction because there is a mortgage contingency that survives in the purchase and sale and start the whole process of selling the home over from day one with a new buyer that they have to find so a commitment date extension is common and not something necessarily to panic a seller or a listing agent or a sellers attorney everyone is seeking to achieve the same objective and in today's day and age the requirements can be endless and the paperwork shuffle never-ending to get all the ducks in a row for the lender to issue a clean commitment issuance of the mortgage commitment is typically the golden moment in a transaction as it is at this moment that everyone can breathe a sigh of relief because what's left is simply scheduling the closing doing the final walkthrough and actually closing and for the property to sell so we can appreciate with this discussion of the mortgage commitment and the mortgage commitment date how a seller is tickled pink and excited when they receive an offer without a mortgage contingency what we call a cash offer since they don't need to fret then about the buyer getting the mortgage approved and getting their mortgage commitment in hand but again it's very common and it's the norm for buyers seeking to purchase a property to get a loan and in doing so then they're going be looking to get a mortgage commitment and that date typically falls three to four weeks after the signing of the purchase and sale and that makes it usually right on the doorstep of the closing if the closings in for five or six weeks from accepted offer we understand that the mortgage commitment is coming usually just a little bit before the closing date so this is an important element to any transaction and it's important if a buyer needs an extension on their mortgage commitment date that they're getting that extension in writing so you'll want to make sure that you're tracking your mortgage commitment date as a buyer's agent I'm careful to put that date on my calendar and to check in with my buyer client and their attorney as it approaches and their lender to make sure everything is in order and if necessary to get the extension i'm charles journey reach out at anytime for assistance with buying the right home selling for the best price or to get your questions answered about the market your home and the community take care