What Is a Loan Commitment in Real Estate?

🔑 What Does a Loan Commitment Mean?

After full underwriting — including credit, income, title, and appraisal reviews — your lender may issue a loan commitment letter confirming that they will lend a specific amount, subject to certain conditions. It’s one of the final steps toward closing once your financing contingency is satisfied.

The commitment letter typically includes:

• The approved loan amount and type
• The interest rate and loan term
• Conditions that must still be met before closing
• An expiration date for the approval

📄 Conditional vs. Final Loan Commitments

A conditional commitment means the lender intends to fund your loan once all conditions — such as final title clearance or proof of insurance — are met.

A final (or firm) commitment means everything has been verified and the loan is fully approved for funding, pending closing and signatures.

📈 Why a Loan Commitment Matters

Your loan commitment gives sellers confidence that your financing is secure. It also helps you move forward without risking your earnest money deposit once your financing contingency period ends.

It’s also the stage where the lender confirms the home’s appraised value aligns with the loan amount. If the appraisal comes in low, your loan terms could change — learn more in our guide on the appraisal contingency.

📜 Title & Insurance Requirements

Before closing, your lender will verify clear title and require a lender’s title insurance policy to protect its financial interest. This ensures there are no liens or ownership disputes that could affect the loan.

⚠️ Tips for Buyers

• Avoid major credit changes, new loans, or job moves while the commitment is active.
• Keep property conditions stable — any damage could delay or void approval.
• Track your expiration date; commitments are typically valid 30–60 days.
• Always review conditions in writing before signing final closing documents.

Strengthen Your Offer with Confidence

A loan commitment gives you credibility with sellers and moves you closer to closing. List your home FSBO through Brokerless and stay informed at every financing stage.