loan approval commitment letter
 

Is a formal document from a lender stating that they intend to provide financing to a borrower, assuming certain conditions are met. It is issued after the underwriting process, which gives it more weight than a pre-qualification or pre-approval letter. 
For a mortgage, this letter is a critical step that demonstrates to sellers that a buyer is serious and has a high likelihood of securing financing. A borrower is not officially committed until they sign the final closing documents. 
 

Types of commitment letters
There are two main types of commitment letters, each representing a different stage of the approval process: 
 

Conditional commitment: Issued when a lender approves the loan in principle but specifies outstanding requirements that must be met before final funding. Common conditions include a satisfactory home appraisal, clear title report, and proof of homeowners insurance.
 

Final commitment: Issued once all conditions listed in the conditional commitment have been satisfied. This letter is the lender's unconditional promise to fund the loan, signaling that you are clear to close. 
 

Common contents of a commitment letter
While the exact details can vary by lender, a commitment letter typically includes: 

Loan amount: The total amount of money the lender is committing to provide.
Interest rate: The specific rate and whether it is fixed or adjustable.
 

Loan term: The length of the repayment period (e.g., 15 or 30 years).
Property address: The specific property the loan is for (in a final commitment).
 

Conditions: A list of any remaining requirements the borrower must fulfill before closing.
 

Expiration date: The date by which the borrower must accept the offer or close the loan. These letters are often valid for 30 to 60 days.