In this article, we will cover and discuss when am I committed to mortgage lender for a home loan. Mortgage loan officers do a lot of work in order to get a clear to close from the mortgage underwriter. A loan officer nor a lender can charge any fees, costs, or commissions up front until the loan closes. Many borrowers are under the impression that once they sign the loan estimate they are obligated to go through with the mortgage loan until it closes. This is not correct. Borrowers can close the mortgage loan up to the day of the home loan closing. In this blog, we will cover when am I committed to mortgage lender for a home loan.
How Long Does The Mortgage Process Take?
Committing to a mortgage lender depends on the steps involved in the mortgage application process. Here is a general outline of the typical timeline. Before committing to a mortgage lender, many homebuyers start by getting pre-approved for a mortgage. Pre-approval is not a commitment to a specific lender but provides an estimate of the net tangible benefits. It helps you gauge your budget.
After getting pre-approved, borrowers can shop for the best lender that offers them the best terms, including interest rates, loan types, and fees. You are not committed to any lender at this stage.
Borrowers can cancel a mortgage loan up to the date of the closing without any obligation. Most mortgage loans take at least 30 days normally to close. Some may go into 45 days to 60 days depending on the mortgage conditions on the conditional mortgage loan approval. Once you’ve chosen a lender, you must formally apply for the mortgage. This involves submitting a complete application with your financial information, employment history, and other relevant details.
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Credit Check and Underwriting Mortgage Process
The lender will check your credit history and underwrite your application. This is a critical step in the process, as the lender will assess your creditworthiness and ability to repay the loan. The lender will issue a loan commitment letter if your application is approved. This letter states that the lender will provide you with a mortgage loan under specific terms and conditions. It’s important to review this letter carefully.
Once you receive the loan commitment letter, you can accept the lender’s offer. Accepting the offer is the point at which you commit to that specific lender for the mortgage.
After accepting the offer, you’ll begin the closing process. This involves finalizing the loan details, signing the closing documents, and transferring the property deed. It’s also when you’ll make a down payment and pay closing costs. So, you commit to a mortgage lender when you formally accept their loan offer after receiving the loan commitment letter. It’s important to consider the terms and conditions of the loan before making this commitment, as it is a significant financial decision.
What Does The Mortgage Loan Disclosure Mean?
The mortgage business also requires mortgage loan disclosures to be sent out to borrowers. If there are any changes from the original disclosures, then re-disclosures need to be sent out again and again. These disclosures can consist of dozens of pages. Borrowers often get frightened due to the massive amount of paperwork they are receiving. Some paperwork is rather very difficult to understand. Many times, the mortgage disclosures are redundant, confusing, and consist of a bunch of legal terminologies. May take days for borrowers to review.
What Is The Initial Mortgage Disclosure After The Mortgage Loan Application?
After reviewing the Loan Disclosure and other mortgage disclosures, some borrowers still do not understand what it means. Mortgage regulators have created these disclosures and re-disclosures requirements to protect consumers from predatory lenders.
The regulator’s goals were for consumers to understand mortgage rates, terms, and their rights to shop for mortgage rates and mortgage loans.
But this good intent by mortgage regulators has made things worse for consumers. Many industry professionals and consumer advocate groups recommend a simple one-page disclosure sheet instead of dozens of pages of disclosures where it confuses consumers. Borrowers wonder when am I committed to mortgage lender by signing all of these disclosures.
Documents Required To Process Mortgage Loan
Borrowers also need to provide personal financial documents to their lenders such as the following:
- two years’ tax returns
- 60 days bank statements
- two years W-2s
- 30 days paycheck stubs
- bankruptcy documents
- foreclosure paperwork
- multiple letters of explanations
- other documents
When am I committed to mortgage lender? There is no obligation for borrowers to be committed to the mortgage loan. The borrower can cancel their mortgage loan up to the date of the closing of the mortgage loan. Borrowers are not obligated to go through the mortgage loan with their lender. They can cancel at any time until the date of the mortgage loan closing.
When Am I Committed To Mortgage Lender After Signing The Real Estate Purchase Contract?
Once a home buyer gets pre-approved by a lender, the loan officer will issue a pre-approval letter. With a pre-approval letter, homebuyers can go shop for a home and enter into a real estate purchase contract. The real estate purchase contract will have several contingencies. Examples of contingencies include mortgage loan contingency, home inspection contingency, appraisal contingency, and other contingencies where the home buyer can back out of the real estate purchase contract. Real estate purchase contracts are legally binding contracts and can be enforced if it is not written up the right way.
Do I Need a Real Estate Attorney Buying a House?
It is recommended that home buyers retain a real estate attorney to review the real estate contract. Borrowers should make sure that the contract has the proper contingencies to protect them from an out. The real estate contract should state if something goes wrong that the home buyer can get their earnest money back. Real Estate Purchase Contracts are different than mortgage loan applications where there are stipulations with them and not with mortgage loan applications.
Can I Cancel a Home Purchase Contract Before Closing?
A mortgage loan borrower can cancel a mortgage loan application at any time during the mortgage loan process. The borrower can cancel a mortgage transaction up to the date of closing. Mortgage borrowers are not obligated under any circumstances to commit to the mortgage lender.
On refinance mortgage transactions, borrowers can cancel three business days after closing which is called the rescission period for the lender to be able to fund the loan.
Homeowners can cancel their refinance transaction after closing or until the loan funds are which is three business days after closing. Refinance mortgage loan funds three business days after closing.
Cases Where Borrowers Cancel Loan During Mortgage Process
The majority of borrowers do not cancel their mortgage loan applications during the loan application and approval process. However, there are cases where borrowers cancel the application and decide to go with another lender. Whether it is due to delays in turnaround times or due to mortgage lender overlays or sometimes not getting along with the loan originator. Whatever the reason may be, borrowers are not obligated to the loan from a particular lender.
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Can You Back Out of a Mortgage After Signing an Intent To Proceed?
Borrowers are not committed to going through with the loan with the original lender. If the borrower has applied for an FHA loan and an appraisal has been ordered and completed and paid for by the borrower, then that FHA appraisal can get transferred to another lender and there is no cost out of pocket.
Most often, the home sellers will grant an extension if the home buyers change mortgage lenders during the mortgage loan approval process.
There may be delays in closing the mortgage if the borrower changes lenders during the mortgage loan process. But they can always ask for an extension from the home seller.
This blog about When Am I Committed To Mortgage Lender For a Home Loan was updated on January 17th, 2024.
