It is absolutely not strange or suspicious that your mortgage broker or loan officer would accept your loan application without a fully-executed sales contract. Although it is certainly unusual for a seller to request a loan commitment prior to accepting your offer, it is not that unusual to obtain a loan commitment while you're still shopping for a house. In fact, it can be very smart, if you're a serious buyer. Remember that a preapproval / prequalification letter is typically only based on a credit review and brief interview. A commitment letter (loan commitment) means your file has been processed and submitted to underwriting and conditionally approved. That's radically different.

There are three C's supporting the mortgage underwriting stool: Credit, Capacity, and Collateral. The collateral analysis naturally requires property-specific documents -- but a commitment can be issued *without* a specific subject property, using a TBD address. If you're approved in terms of your credit and capacity, then you can have the utmost confidence about shopping for any property that meets the parameters of your approval. And because your file has already gone through the initial, possibly lengthy turntimes for initial underwriting that are so prevalent currently, you will be able to close faster when you actually do finalize a sales contract.

Excellent answers here. I would also like to add that I have never seen mortgage commitments BEFORE an agreement of sale is signed. The bank usually needs the agreement of sale, as well as other items, before a commitment can be signed.

Terrence Charest, e-Pro

Although uncommon, it is neither unreasonable or unethical. Banks do this all the time with "foreclosures" and buyers accept it as common practice. The normal terms of the contract will allow for a period of time for the buyer to obtain bank approval. Under the case described, the sellers are requesting the funding contingency be taken care of prior to acceptance of the offer.

Best wishes with your purchase.

The Eckler Team

Good Morning, I don't think that it is suspicious that the seller is requesting a commitment. There are many problems in the mortgage world right now. However there will have to be conditions on that commitment as they cannot be met until you actually are in a written agreement. For instance the commitment can be issued however it will be contingent upon the house appraising, receiving title insurance, a year's worth of homeowner's insurance, final verification of employment which happens just days prior to settlement. It has been happening more often that a pre-approval is received for a mortgage and then right before settlement the mortgage company cannot perform. While a commitment is stronger than a pre-approval it is still not a guarantee for financing. In fact I would not at all be surprised if the commitment also has the condition that all submitted information must be approved through underwriting and they cannot even send the file to underwriting until the appraisal is received. So although I understand the seller's position it will not offer them 100% protection.

Jennifer Daywalt, Realtor
Re/Max Results Realty
Top Realtor 2004, 2005, 2006, 2007, 2008
610-999-7693 Direct
610-489-7355 Main Office
Sellinghomesjenn@aol.com

Hi!
I wouldn't say this is common, but it certainly isn't unethical.

You can't blame sellers in today's market for wanting to make sure the buyer is viable. So called "pre-approval" letters often aren't worth the paper they are written on. They are often based simply on a conversation between the mortgage broker and buyer, after which they run a credit check. Usually, nothing more is verified at that time. Buyers in my area have, at times, come with a full commitment in hand which is subject to a sales contract (finding a home) and a suitable appraisal.

Customary practices in every state vary, but here the home will be taken off the market while the buyer goes through the mortgage process to satisfy the mortgage contingency. The process can now take up to 30 days because of all the refinancing going on.. The seller has lost valuable marketing time if the buyer is turned down for the loan.. The stronger you look as a buyer, the better you will be perceived by a seller.

What your seller is asking for isn't unethical........from their point of view, it's prudent. Showing you are credit worthy in today's turbulent market will only help strengthen your position.
Good luck with your purchase!
Debbie

Typically speaking, the seller will want to see a loan pre-approval come with the offer. Rightfully so. They want to know that your credit has been pulled, employment verified, and that you are financially able to make good on the offer. As far as an actual commitment, a lot more has to happen to reach that point. I don't know the laws in your city/state, but this is kind of weird. Maybe the seller is paranoid about all the bad press out there. The home still has to appraise and your application must pass through underwriting. I wouldn't call this request unethical, just unorthodox. Hopefully you have a Realtor, and so does the seller, and they can be on the look out for anything else that appears fishy. Go with the flow for now, but be cautious if any other strange requests are made. Good luck.