We received another question from a viewer: “What is the difference between a mortgage contingency and a mortgage commitment?”

A mortgage commitment is a written promise to lend a borrower money once certain conditions are satisfied.

A mortgage contingency is a provision in an offer and purchase and sale agreement which allows a buyer to terminate the contract, with the return of buyer’s deposit, if the buyer is unable to secure a mortgage commitment on or before a certain date. This term is included with the offer and is an important term of the contract.

A lender will ask any borrower for many important documents. It is critical for a borrower to deliver those documents as quickly as possible. By responding quickly, the borrower has increased the chances of an early mortgage commitment or understanding what additional information or documents may be necessary. Many lenders will check a borrower’s creditworthiness early in the process; however, before issuing a commitment to lend, the lender will underwrite the loan to verify many aspects of the borrower’s qualifications including the borrower’s income, debt obligations, employment history, credit score, and much more. A borrower should never lie to their loan officer. In most cases, the loan officer will already know the truth.

A successful borrower will provide their lender all of the requested documents as quickly as possible to receive a mortgage commitment before the mortgage contingency date and to avoid unnecessary delays. When a commitment has not issued before the mortgage contingency date, the buyer’s attorney usually must ask for an extension on the mortgage contingency date. This can cause all parties involved to become anxious. The seller may begin to think that this transaction will not occur and may consider looking for a new buyer.

Try your best to get everything to the lender as quickly as possible. Your loan can then be approved in expedited manner which helps to keep the transaction stress free.

If you have any questions about mortgage contingencies, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.