Mortgage Commitment Letters

It is important to read and review a mortgage loan commitment letter. If you fail to understand when the loan commitment deadline is and fail to extend the deadline or terminate the contract before that deadline passes, you may lose your deposit from when you made the offer to purchase and signed the purchase and sale agreement for your home. At Pulgini & Norton, our real estate attorneys can help individuals in Boston and the surrounding cities understand the terms of a mortgage and review a mortgage commitment letter.

Loan commitment letters must be clean and received on the loan commitment date specified in the purchase and sales agreement. The loan commitment date is a day specified in a purchase and sales agreement that a buyer's lender must provide a written commitment to a borrower that would provide financing for a particular home. Usually, the date is 21-35 days after the parties sign an offer to purchase. The date is usually stated as part of the mortgage contingency clause, which you should make sure is in your offer to purchase real estate and also make part of your purchase and sale agreement. Many homebuyers put down what are called earnest money deposits, which total 5% of the total purchase price of a house.

It is important that a homebuyer receives a loan commitment letter by the loan commitment date, and that letter should be "clean." This means that any conditions in the letter can be met easily, such as verifying employment or reviewing a credit score. In some cases, the loan conditions will not be within your control. For example, if there is a condition related to an appraisal, this is out of your control, and a lender may refuse to finance the purchase. This could result in the loss of your deposit.

When a lender is not able to give you a commitment letter by the date noted in the purchase and sale agreement, you can either request a written, signed extension to the deadline or terminate your purchase and sales contract so as to protect your deposits. If you do not get the extension or terminate the contract, you may lose the deposit if the lender does not actually provide the financing in time for closing.

By retaining an attorney, you can make sure that you are fully informed about your choices and protect your earnest money deposit before it is too late. Your attorney can also make sure that your letter includes language explaining that you will terminate your contract if the seller does not give you an extension.

What if the lender decides you do not qualify for the home loan? As long as your purchase and sales agreement accounts for this possibility by allowing you the right to terminate before the loan commitment date, you can terminate your contract.

Most people must obtain mortgages in order to finance the purchase of a home. It is wise to make sure an attorney is involved so that your purchase and sales agreement allows for the possibility of termination by a date that makes sense for you, and that your mortgage commitment letter is clean. The Boston lawyers at Pulgini & Norton can advise individuals on home purchases and sales. Call us at 781-843-2200 or contact us via our online form for a consultation. We represent clients in Andover, Braintree and Brookline, as well as other Massachusetts communities.