The Difference Between A Mortgage Loan Commitment And A Mortgage Prequalification Letter.

If you have been house hunting, you may have realized that pretty much no Realtor will work with you until and unless you have been prequlified for a mortgage.Real Estate sales agents in most cases insist that you have this letter before the home search begins.

The sales agent wants or needs this letter to determine what kind of buyer you are, what kind of home you can afford and if you are actually in a position to buy a house.

But many people mistakenly believe that a prequalification letter means they are approved for a mortgage.I am here to tell you that it is definitely not an approval.

This document is nothing more than an assumption of your ability to get approved for a mortgage.

The mortgage prequalification letter states that the loan officer has reviewed the home buyer’s credit, income, work history etc and that the borrower is “Pre-Qualified” for a mortgage with a certain dollar amount.

The operative term in the letter is pre-qualified. That means before you are actually approved.

In just about every instance, the document states in no uncertain terms that it is not a commitment to lend money.

Does this mean anything to you?

It means that even if you think you are qualified to borrow and borrow a certain amount, you may not be at all. The prequal letter is really quite worthless.

What you should get when starting the process is a Mortgage Commitment.. A commitment is a letter from a bank or lender that is actually binding. The commitment states that you will receive a home loan as long as you meet the conditions that it lays out.

It means Your loan has been reviewed by an underwriter and is approved.

A mortgage loan commitment is binding and the lender must issue the mortgage if you fulfill all the requirements. The bank can not simply decide not to give you the mortgage on a whim.

Why Do I Need That?

Well, the bottom line is that you may have been pre-qualified for mortgage, but when it comes right down to it, you may not be able to actually get approved for a loan.Unfortunately, this is not uncommon. Many times people have gone out, done all the right things, find the home of their dreams, only to be left heartbroken.

This is a terrible crisis. They lost their home, their deposit money, everything. And on top of it, they have nowhere to sleep.

Avoid all this and get a Mortgage Loan Commitment from the start.

It also helps you bargain with the seller of the home too. When you negotiate for your new home with a seller, having a mortgage loan commitment in your hand is virtually the same as being a cash buyer.