Can My Bank Back Out of a Commitment Letter?

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In this tutorial video, we'll go over what a commitment letter is, how binding it is, and under what scenarios a mortgage lender could back out of a loan commitment letter before a residential sale closes.

We'll go over the difference between a pre-approval vs a loan commitment letter. We'll explain how a loan commitment letter will often have many additional terms and outs for the bank, such as requirements for additional documentation needed in order to get a clear to close, or outs for the bank if certain things happen.

We'll also talk about what some of the most common outs for banks to pull funding might be, such as a loss of income. This can happen if the prospective borrower loses his or her job, and thus his or her source of income, prior to closing.

The bank will typically call the borrower's employer just prior to closing, i.e. 1-2 day, to verify employment. If for some reason the borrower lost his or her job before closing, then the bank will most likely exercise its right to cancel its commitment to lend, and thus utilize an out of the commitment letter.

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Hauseit Group LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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