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What is the Difference Between a Loan Commitment and a Loan Approval?

September 8, 2015 by Marc Jacob

Many home purchase contracts today will give the Buyer a certain amount of time to get a “Loan Commitment” or “Loan Approval,” if the Buyer seeks financing to purchase a home. The Buyer must get either the Loan Commitment or Approval by the Loan Contingency Deadline.

What is needed from the lender before the deadline?
What is needed from the lender before the loan contingency deadline?

The terms “Loan Commitment” and “Loan Approval,” are often used to mean the same thing in some standard real estate contracts and even in a number of court cases. One could argue that a loan commitment is stronger than a loan approval, or vice versa, but we have not yet seen any clear distinction in Missouri.

Although the lender may offer you a “Pre-qualification” or a “Pre-approval,” the Loan Approval or Commitment are really the important benchmarks when it comes to the loan contingency deadline.

A borrower will therefore want to discuss with their lender what is required of them to get a document from the lender that assures them the lender will provide financing.

Often lenders do not want to discuss appraisals and final underwriting until it gets closer to closing. This can be an area of contention between the borrower and the lender. If the lender has not finished underwriting, but has issued the approval or commitment, the borrower may be on the hook to purchase the house even when the bank is not yet fully committed to funding.

For more information on what happens if the lender does not commit to funding, read this.

For this reason, we suggest that borrowers discuss the issue with an attorney if their lender is not willing or able to give them a satisfactory commitment or approval, or if they want some help navigating this process.

If you have questions about obtain a loan commitment or approval, please contact us at mjacob@marcjacobesq.com or at 314.862.2237

Filed Under: Real Estate

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  • Tax Sales & Title Issues in St. Louis County
  • GUEST BLOGGER: Retirees Looking To Homestead Can Use These Tips For Buying A Property
  • Commercial Leasing For Small Businesses
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  • Why Should My Lawyer Review the Home Inspection?

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  • Home
  • About Us
    • Mission Statement
    • Marc Jacob
    • Jace Brotherton
    • Firm News
  • Real Estate
    • Real Estate
    • Commercial LL – Tenant Law
    • Real Estate Litigation
    • Lawyer to Buy A House?
    • Motel/Hotel Purchases and Sales
    • Tenants Rights Law
    • Quiet Title Lawsuit
  • Business Law
    • Business Law
    • General Counsel
  • Not-For-Profit
  • Law Blog
    • Law Blog
    • Legal Resources
  • Contact Us