Conditional commitment loan approval

The home buying process is often long, exhausting, stressful and yet rewarding. Finding a home is usually the most fun and exciting part of the process. But then comes finding and applying for a mortgage.

The mortgage process is the most stressful time during the home buying stage. First you have to do a lot of research to find a loan that meets your needs. And after that, you actually have to hope that you will be accepted to pay your lender hundreds of thousand of dollars over the course of 30 years.

In some cases lenders will not deny you coverage, rather will offer you the funds as long as you meet certain provisions.

The ezinearticles.com article, “Home Loan Approval with Contingencies,” written by John Mussi, explains what to do if your lender provides you this ultimatum.

There are instances when a lender will offer the borrower loan coverage depending on contingencies or a conditional commitment.

“It means the mortgage is approved if the buyer or seller meets certain conditions prior to the time of settlement – these items are called contingencies. Although contingencies are usually placed upon the seller to perform things such as replace the roof, upgrade the heating system, or other similar expenses, sometimes a buyer is also given a conditional commitment. Before a settlement date is even scheduled, it will be necessary to provide proof to the lender that his conditions have been met so that he can issue a firm commitment on the home loan.”

The lender will require you to perform these contingencies prior to lending. Even though a task may seem small and unimportant, it is serious and essential to the lender.

A couple examples of contingencies:

Your lender may require you to pay any outstanding credit card balances or other bills, in full, and provide proof of this before accepting your application.

“If you have been on your job a short period, the lender may require some proof of continued employment just prior to closing the loan. This guarantees the lender that you are still working and are making at least the same salary you were making when the loan was approved.”

The lender may also want proof (a written statement) that if someone is helping you with settlement costs, that it is a gift and not something that you must repay.

There may also be conditions placed on the seller by the lender, prior to selling a home.

“Some things a lender might require of the seller include a new roof, repair or replacement of appliances included in the sale, and if the original termite inspection required treatment, a re-inspection may be requested prior to closing. Although the lender’s priority lies with the buyer, he is more concerned with protecting himself and his company in the execution of the home loan. He certainly does not want to put a new buyer in the position of having to put out a large outlay of cash right after buying a new home.”

Make sure that you do whatever your lender asks of you and in a timely manner to make sure the process continues to run smoothly.

If your lender requires you to meet certain contingencies, consider yourself fortunate; at least you didn’t get denied altogether.

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