3 Hidden Traps In A Mortgage Commitment

Sometimes receiving a mortgage commitment letter doesn’t mean the deal is done.

There can be times where the email arrives with the lender’s mortgage commitment and everything looks to be in order.  Unfortunately, there are other times when the letter arrives and the conditions tell a different story.

Here are 3 potential conditions that may cause issues in your mortgage commitment letter:

1. “Subject to Credit Committee Approval”

This isn’t really a Commitment at all but rather just an expression of interest.  Don’t let your borrower get excited until you’re advised that this condition has been satisfied.

2. “Subject to Satisfactory Appraisal”

The key here is “Satisfactory,”  while the value may be what the borrower wanted, it may not be where the lender wants.  And if the appraisal discloses issues with the property or if the comparables don’t make sense, the lender will not remove this condition.

3. “Subject to Lender Approval”

This means that the lender won’t be funding the mortgage themselves but instead will be shopping the deal around to their pool of lenders.  Nothing is wrong with this, but the commitment remains conditional until they remove it.

When mortgage commitments come with conditions, they’re just that – conditional. 

It’s important to make sure that your borrower is informed and aware of what these conditions mean.  And to also make sure your borrower doesn’t remove subjects on a large purchase or make other arrangements on a refinance.  Borrowers will need to wait until the lender has advised that all of the conditions in the mortgage commitment have been satisfied.

At Kokanee Mortgage, we always try to keep our commitments as simple as possible. If you do have any questions about conditions, we’re always here to help.  Our expert underwriters will clarify any issues that you may have and get you to a successful closing.