Asked and AnsweredOnce I get a loan commitment, is my loan approved?
No. The loan underwriting process has gotten much more complicated since the financial melt down. Banks are actually looking over documents and imposing significant conditions that have to get satisfied prior to the closing. Those “conditions” usually appear at the end of the commitment letter. Sometimes the conditions require the cooperative or condominium to take an action, such as increasing the insurance coverage or clearing a violation. Sometimes the commitment is issued subject to verification of the building’s “owner occupancy” ratios. In the old days, a commitment was not deemed issued unless the appraisal came back with a value equal to or greater than the purchase price. Today, you can have a good appraisal, but other conditions can be imposed that the buyer in incapable of satisfying. Exactly when a mortgage contingency is satisfied should be approached carefully, so that the buyer doesn’t find himself or herself in the unlucky position of having a bank issue a commitment letter that will never be funded. For more on loan commitment issues, see "The New Normal".