3 Hidden traps in Mortgage Commitments

The email arrives with the lender’s mortgage commitment and everything looks to be in order.  That is, until you read the conditions.  Here are 3 potential deal killers you need to know:

  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.”  The value may be what the borrower wanted, but if the appraisal discloses issues with the property or the comparables don’t make sense, the lender will not remove this condition.
  3. “Subject to Lender Approval”: What’s happening here is that the lender won’t be funding the mortgage themselves, but rather will shop the deal around to their pool of lenders.  Nothing wrong with this, but the commitment remains conditional until they remove this.

A mortgage commitment with conditions is just that – it’s conditional.  Make sure your borrower doesn’t remove subjects on a purchase or make other arrangements on a refinance until the lender has advised that all of the conditions have been satisfied.

At Kokanee Mortgage, we try to keep our Commitments as simple as possible and if you do have any questions about conditions, we’re always here to help clarify them and get to a successful closing.