What is a Commitment Letter?
Commitment letters are formal and legally binding documents that are issued by a lender to a loan applicant. The text of the commitment lender contains an offer to extend a loan to the applicant. Within the content of the letter, the exact terms and conditions involved with the loan commitment are specified. The main purpose of the commitment letter is to inform the borrower that the loan has been approved, as long as certain conditions are met. Known as an Offer of Advance in some parts of the world, the commitment letter in a sense serves as a cover letter to the actual contract that will be signed by both the lender and the borrower. While the format may vary slightly, most lenders prefer to include the commitment letter along with the formal agreement. Within the text of the commitment letter, the lender will include specifics that are important for the applicant to study closely. The total amount of the loan is included, along with a breakdown of the interest rate that will be app
Related Questions
- Commitment letter issued on request. If a lender issues a commitment letter only at the applicants request, does the lender have a preapproval program?
- What if the mortgage that appears on the commitment is not held by the same lender on the credit bureau or payoff letter?
- What is a Commitment Letter?
