Why do Real Estate agents continue to put a commitment date on the sales agreement for an FHA loan?

Asked by Matt In Pittsburgh, Pittsburgh, PA Wed Feb 8, 2012

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17
Gregorio Den…, , San Diego, CA
Wed Feb 8, 2012
I would advise you to speak for yourself. Just because you seem to be unable to do something certainly does not mean others cannot. Sure, things happen and sometimes it gets pushed back, but for you to make a blanket statement for all mortgage professionals is irresponsible.

If you want to announce your limitations, feel free; everyone is not you.
1 vote
Jim O'Rourke, , Philadelphia County, PA
Wed Feb 8, 2012
Since a loan commitment letter is more accurately a "Conditional Loan Approval" letter, why not amend the standard agreement to be more easily understood by the Buyer and Seller; stating that "Conditional Loan Approval" must be received by (date), and "Final Loan Approval" must be received by (date)? As approval times vary, the lender could more accurately provide these dates as a partner in the homebuying process; especially if a buyer is "Pre-Approved" before making an offer.

At the risk of straying off topic a bit, a more important question is "Why does a buyer have to pay a 'Commitment Fee', if there is no real commitment to provide a loan until just before closing? As a seller, I would be relying on that loan to be committed before I took my home off the market.

If these loan fees are actually underwiting fees, processing fees, or document review fees; then identify them properly and don't refer to them as a "commitment fee".
1 vote
Matt In Pitt…, , Pittsburgh, PA
Fri Feb 10, 2012
Greg, This is precisely the point. Words mean something. "pushed back" means failure to complete the terms of the contract. "Committment" means unconditional, no turning back, no conditions. Don't take all this personally. I am only pointing out that I have had more than a few clients come to me from another lender who were unable to close their loan with that lender. These clients were confused that they could not close their loan, because they had been issued a "Committment". All I am saying is lets be honest in our terminology. This industry needs to strip away as much of the confusion to consumers as possible. If committments meant what their definition is, then we would close many of them the same day they were issued.
0 votes
Gregorio Den…, , San Diego, CA
Thu Feb 9, 2012
Matt,
Typical that you avoid the rest of the content and focus on one mere sentence. You stated:
"99% of the time these are not true committments being received but merely conditional approvals. "

Again I say, maybe that's your average and your mode of operation, but it's not mine.

I said: "Sure, things happen and sometimes it gets pushed back"
And I said that because I'm a realist. I would not claim that 99% of the time I can or cannot do anything because it's not true. I also certainly would not claim that 99% of the time someone not in my control can or cannot do something. I call that irresponsibility.

Apparently what you should have posted was:

"Why do Real Estate agents continue to put a commitment date on the sales agreement for an FHA loans they send to me since I cannot give them a commitment in that time frame 99% of the time?"

You may want to re-post.
0 votes
Matt In Pitt…, , Pittsburgh, PA
Thu Feb 9, 2012
Gregorio, What is irresponsible is not wanting to clear up the ambiguities that exist within our process. Why is it confrontational or insulting to state the facts. You just said "pushed back". I'm not sure if you're aware but pushed back is not a legal solution to a contract unless mutually agreed upon. The contracts content and requirements need to have real world value and mesh with what is actually issued by the lender. A conditional Approval.
0 votes
Matt In Pitt…, , Pittsburgh, PA
Wed Feb 8, 2012
Gregorio, Closing an FHA loan in 30 days or less is fairly standard currently. Getting a committment that is worth the paper it is written on in 2 weeks is absurd.
0 votes
Gregorio Den…, , San Diego, CA
Wed Feb 8, 2012
The better question is:

Why are there still loan officers that cannot close an FHA loan in a reasonable amount of time?
0 votes
Matt In Pitt…, , Pittsburgh, PA
Wed Feb 8, 2012
Blair, I said nothing about changing the closing date. However agents write contracts at times without consulting bankers regarding timeframe. Each loan is unique these days and real estate agents seem to thimk if they write in a date for committment...... it should be received by that date. Most of these agents have very little if any knowledge of the mortgage process.
My point is the terminology is flawed. 99% of the time these are not true committments being received but merely conditional approvals.
Matt
0 votes
Blair W. Coh…, Agent, Monroeville, PA
Wed Feb 8, 2012
No commitment date? Hmm, how about no time frame to complete inspections! How about no closing date!

Yeah, why not wait until the mortgage lender decides to get around to processing and committing the loan and then we will close maybe in 60 or 90 or 180 days. Enough time for the interest rate lock to run out so maybe a higher one can be charged.

The Buyer's movers will come whenever they want to, but it won't matter because they will have to wait until the Seller decides they feel like moving out. Pay your taxes when you want, not when they are due.

We work on schedules, to accommodate realistic time frames.

Obviously a mortgage broker who feels we should not have commitment dates is not goal oriented, is not concerned about anybody else's time frame, and his reliability and credibility must be questioned. Now there may be times when commitment dates may not be realistic and if that is the case then don't take the application.

When the mortgage people I deal with give a commitment they stand behind and close it. They are credible, can and do commit and close FHA loans in 30 to 45 days and sometimes quicker and I am happy to recommend them. They help my and my Buyer's transactions go smoother and make my life easier.
0 votes
Marsha Sebas…, , Pittsburgh, PA
Wed Feb 8, 2012
Time is of the essence throughout the sales agreement contract for contingencies to be met by buyer and seller. Mortgage committment hopefully holds the lender and underwriting to specific dates since they also have a copy of the contract to relieve the seller that they are on top of the lending process and working with the buyer towards a smooth closing.
0 votes
Matt In Pitt…, , Pittsburgh, PA
Wed Feb 8, 2012
Amen Jim. There is a disconnect between realtor and banker language. Now more than ever.
0 votes
x, , Pittsburgh, PA
Wed Feb 8, 2012
A committment date is a pledge to the seller that the buyers are moving toward closing the agreement. If the date isn't met, then they can walk away.

There are conditions to all loans, not just FHA loans. As real estate agents, we advise our cllients what to do and what not to do prior to closing. If a buyer starts a mortgage application, then has a heart attack and requires short term disability, or starts buying appliances and furniture for the home, chances are the mortgage will not go through.
0 votes
Matt In Pitt…, , Pittsburgh, PA
Wed Feb 8, 2012
OK, Let me ask it another way. What kind of assurances do you expect from that committment? As Bankers we give you something with lots of conditions usually which renders the paper meaningless. Or your getting a committment from a lender who has their fingers crossed. The FHA loan cannot ever be fully committed until 48 hours prior to closing. Want proof that a loan is in process? Ask
0 votes
Connie Wolff, Agent, Pittsburgh, PA
Wed Feb 8, 2012
It's a crucial date, Matt and I'm surprised you're asking it as a mortgage broker. That's the date upon which everything in the transaction hangs. Once that date is reached and the commitment is in place, there are no more contingencies, conditions, etc. and the buyer is good to go.
Web Reference:  http://www.soldbyconnie.net
0 votes
Jill Stehnach, Agent, Sewickley, PA
Wed Feb 8, 2012
Why wouldn't we do so? I am missing your point?? As has been said below it is a date that we place on all contracts if financing is involved. Both seller and buyer would expect it to be on the contract, and it allows for their to be teeth in the process so that all parties keep the deal moving forward.
0 votes
Benny Smith, Agent, Pittsburgh, PA
Wed Feb 8, 2012
Because the commitment date lets the seller know there is indeed a loan process began and the lender can meet that date.
0 votes
Daniel, , Baton Rouge, LA
Wed Feb 8, 2012
loan commitment dates are applied to all financed transactions, not just fha. It is to force the buyer to comply
0 votes
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