Jeff’s Carlsbad Blog for First Time Home Buyers

Your Carlsbad Home Loan Commitment

Posted in Financial,Mortgage info by Jeff Dowler on December 26, 2007

We’ve been talking about what to expect during the process of buying a home. I’m not trying to share EVERYTHING you can expect but to focus on the highlights AND the critical things you should be aware of as a buyer.

Read Part 1 on How to Make an Offer

Read Part 2 on After the Offer Comes the Negotiations

Read Part 3 on What to Expect After My Offer has Been Accepted (the due diligence period)

I wanted to talk a bit about the loan commitment, since this is such a critical piece of the puzzle.  After all, if you cannot obtain a commitment for a loan from your lender you will not be able to purchase the house. Certainly, you should have gotten pre-approved before you started house hunting, or somewhere early in the process, so you knew that you would likely not have any problems getting a loan (unless something changed, such as your financial situation, or if the interest rates changed significantly).

During the due diligence phase the bank, once they have your signed contract, will order an appraisal. They need to make sure that the home is worth what you are paying for it. This is particularly important to the bank if they are loaning you 95% or more of the value of the home, since the home is THEIR collateral  for your loan. If the home appraises below the purchase, you may to renegotiate the price with the seller, or not more forward.

Once the appraisal has been completed and the report provided to the lender, the underwriter will review the entire filethe details of the loan program, your financial history and all the associated documents, and the appraisaland issue a formal written commitment to loan you the money at a particular interest rate. There may be some final terms and conditions you will need to satisfy by closing as well (e.g., showing proof of homeowner’s insurance).

You will need to notify the seller once you have obtained the commitment for your loan, and this should be done by the end of the due diligence period, unless a written extension was granted.


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