The Loan Commitment is the final stage in the home mortgage financing process. At this point you should have gone through “Pre-Qualification” and “Pre-Approval”. These are both important prerequisites to purchasing a home but neither one of these processes require actually having a particular home in mind, they just let everyone involved know that you actually have the ability to purchase a home in a certain price range.
When you have found a home and put it “Under Contract”, it’s time to start the loan commitment process. At this point, the lender should submit your application. This starts the 3 day clock ticking for the lender to get you a “Good Faith Estimate”. This is also the time for the lender to order an appraisal.
The purpose of the appraisal is to determine if the home is actually worth what you are willing to pay for it. Remember that if you default on the loan, the lender needs to know that they will be able to resell the property. We will talk more about appraisals in another article.
While the lender waits for the appraisal to come in they are also verifying all of the details from your application. At this point you might be asked to provide more information like, backup documentation, additional employment verifications, etc.
Once the appraisal is in and all the details are verified the full package is submitted to the underwriter for final approval. Once approved, it’s time to head to closing.