Kwadwo:
A few lenders actually give what I would refer to a as a "conditional" committment. I have seen this mostly with Relocation clients. The conditional part is based upon finding a home that appraises for one, that the taxes and other monthly costs stay within your allowed ratios for the loan, that the lender program you are using is still available, and that your credit/financial situation maintains itself at the state or a better state of when youy applied. Deal with a direct lender if you can, from my experience they tend to know what programs are changing as they change, or even before to alert you to all options as the become available or change. Also be sure to get a good faith estimate from any lender, and ask if there are any additional lender fees that might come into play.

Kwadwo,

To get a commitment letter from the lender the bank/lender will have to do a decent amount of work on your behalf. One of the most important criteria is a bank appraisal of the home you are interested in buying. So, having a mortgage commitment, it implies a final commitment from the bank, much like their persoal promise to give you the money to purchase a specific home. They cannot promise you that you can have the money without having done some research on the home you want to buy. Typically it is 1) Preapproval 2) Bank Appraisal 3) Commitment letter... and a whole lot of stuff in between but for the most part that is the order of events.

Sometimes people will use their mortgage commitment from a deal that did not go through to settlement. In that case you have a commitment letter but with "conditions" one of whch would be that bank appraisal for example. That type of commitment will mke you look pretty strong as a buyer and may give you leverage during negotiations.

So, is it possible? Yes, kind of but the commitment would have conditions. A mortgage commitment with a bunch of conditions is really just a sophistocated preapproval of sorts.

Hope this helps.

Kwado,

If you are a buyer, why would you want a commitment letter before you sign an agreement of sale?

Regardless, the answer is no. The commitment comes from the mortgage company who is saying that they are ready to commit to the mortgage for the buyer. That all of their documentation has been met, the buyer has met all of their criteria. Without an agreement of sale, there is no mortgage to commit to.

There must be more to this question and I do not have all of the facts but based on one sentence, I am going to say no.

A commitment is different than an approval or pre-approval from a mortgage company. I see that some Realtors may be confused.

Renee Porsia
Associate Broker
RE/MAX ACTION REALTY
(215) 669-0589 Direct
(215) 358-1100 Office Ask for Renee
http://www.reneeporsia.com

Kwadwo - Charlene is not quite correct. you can ask for a LP/DU Portability letter. This is much better than a simple pre-qual letter. A pre-qual letter is really not helpful at all because it comes with conditions that the buyer must satisify before they have loan approval. There is no Catch 22 in a Portability letter. If you have this letter and for some reason the first lender goes under you can take letter to another lender and have them finish the process.
Charlene is correct in that the home will have to appraise before the lender will provide the $$ for the loan. So a way to think of it is that not only does the buyer have to have approval, in a way your property must get approval and pass requirements set out by the bank as well. THis approval is usually that the home must appraise and in some cases that certian repairs are made.

Hi, Kwadwo... good question! I don't know what state you live in, but in NC, all contracts contain a clause that require buyers to present a loan commitment letter by a certain date. Even if this is not standard in your state, you can have your attorney write it in.

I suspect you ask the question because you don't want to take your house off the market unless you're sure the buyers can actually buy. It's a common, and real concern. That's why we here often ask for "pre-qualification" letters (pre-qual) from the buyer's lender, to be presented with the offer to purchase. Note that this is not "pre-approval; " those things aren't worth the paper they're written on. Pre-Qualified means that the lender has not just taken the word of the buyer that they good for it, but that they have checked the buyer's credit, received certain documents relating to their income and net worth, and their ability to obtain the loan. Banks often do this, but the catch-22 is that they will require a signed contract (what you call "agreement of sale") before they will take this next step, do all the work required to finally qualify the buyer and provide the loan commitment letter. And to do this, they must appraise the home that the buyer is purchasing. Banks will never offer a loan commitment letter just on the buyer's credit, because they are loaning the money on both the buyer's ability to pay and the home/its value.

so the answer is no, that just won't work. but you can, and should, ask for a pre-qual letter, with a loan commitment letter to come at a certain date.

When you mean Commitment letter, I assume you are speaking of a Loan Approval letter from a lender. If this is the case, then the answer is absolutely yes! I would never recommend a client agree and sign a contract unless that Buyer has provided us with loan approval from 2 seperate lenders. Notice I said approval and not pre-approval. I hpe this helps. Good Luck!