Conditional Commitment
Definition and meaning of Conditional Commitment in real estate.
A conditional commitment is a written statement from a mortgage lender promising to approve a loan for a borrower, provided that specific terms are met before closing.
In more detail
Lenders issue this commitment after performing a preliminary review of the borrower's credit, income, and assets. The conditions listed in the commitment typically include verifying the property's appraisal value, clearing title issues, and confirming the borrower's employment status right before closing. Buyers use this document to show sellers that they are qualified to purchase the home, making their offers more competitive.
However, a conditional commitment is not a final loan approval, and failing to meet any condition can result in the loan being denied.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Issued by | Mortgage lender |
| Typical timing | After pre-approval and before final loan underwriting |
| Required for | Reassuring home sellers of buyer financing |
A mortgage lender issues a conditional commitment to a home buyer, stating that the loan will be funded once the buyer submits their final tax documents and the home appraisal meets the required value.
Frequently asked questions
Can a conditional commitment be revoked by the lender?
Yes, if the borrower's financial situation changes or if they fail to meet the specified conditions before the commitment's expiration date, the lender can revoke it.
How does a conditional commitment differ from a pre-approval?
A pre-approval is a general estimate of borrowing power, while a conditional commitment is a formal offer of a loan that has gone through initial underwriting and contains a specific list of requirements.