The Mortgage Process – Loan Commitment
Dates are Important

If you are financing your purchase you will most likely have been pre-qualified by a lender. This is the first step in the mortgage process and usually entails a lender asking you some basic questions about your financial status and qualifying you on those answers. This does not constitute mortgage approval.

Important Dates

One you have gone under contract for a home you will see two important timelines on the contract, the first is a due date to submit for your loan – usually around 5 days (it’s line 91 on the FARBAR AS-IS Contract). You should have contacted your lender and begun sending them the requested documents by this time. Notify your Realtor you have so they can update the sellers agent that you have fulfilled this condition.

The next date in the contract is the “Loan Commitment Date”. This is a very important date as it states the date you have to have received the loan commitment letter from the lender. (it’s line 87 on the FARBAR AS-IS Contract). Put it in your calendar.

What is a loan commitment?

A loan commitment letter is a letter provided by a mortgage lender that indicates a borrower has passed their underwriting guidelines and that they are willing to offer the borrower a home loan. This has to be provided to the seller by the loan commitment date. If you do not provide a loan commitment to the seller by the loan commitment date you run the risk of LOSING YOUR DEPOSIT if the sale does not complete. Additionally, the seller can withdraw and has no obligation to continue with the sale.

In many cases a lender will offer a loan commitment with “conditions’. These conditions are generally whatever information the underwriter requires to approve the loan.
If you have a loan commitment with conditions you can request an extension of the loan commitment period and ask the seller to sign an addendum to give you additional time to complete the loan application and fulfill the conditions set by the underwriter to complete the loan and grant you approval via the loan commitment.

It is YOUR responsibility to press the lender to complete the underwriting process and issue you with a loan commitment. Ask for continuous updates and request any information the underwriter needs to complete the loan. You risk losing the house and your deposit if you do not have a loan commitment, the seller is not obligated to extend the loan commitment date if you go over – although in most cases a seller most likely will agree to the extension. That’s why its important to be able to show an approval with conditions to show the seller you are on track and the sale has a very good chance of going through.

Here is a quote from our attorney:

“Here is the way the Loan Approval Date SHOULD be described: The Commitment date: The day on which buyer has to decide that they are SURE ENOUGH of their likelihood of getting their loan that they are willing to tell the seller they got it and thereafter bet their deposit on it”. 

If you have any questions on the loan consult with your lender and ensure you are performing to the conditions of the contract.
If you didn’t know or thought it meant something else, that will not protect your deposit.

Ask questions and be aware of your contractual obligations and you’ll be fine!