Many buyers are going to read this and think to themselves, what is this blog about? I have my loan and I was approved. That's all I need and I'm ready to close!
If only it were that easy. Just a quick understanding of how the loan process works will save you agony and a potential loss of deposit. Early in the process of finding your next Fort Lauderdale home, your broker may have requested that you speak to a mortgage professional to get a pre-approval or a pre-qualification letter. It's important to note that this is nothing more than a letter verifying that a lending professional or loan originator has looked at the most basic of qualifications and have given the nod to proceed. These items include but are not limited to job time, credit history, credit score, and income. Most of the time it's nothing more than an, "I'm fairly sure I can get you a loan". Having said that, some actually run these things through a desk underwriting program to get this approval. It's a better process to be sure but the difference there is that a desk underwriting approval is computer scored and does increase the odds of success.
What happens next in the loan process is where the rubber meets the road as they say. Once the full credit application is recieved and the file is turned over to the underwriting department the underwriter will work their magic and either approve or deny the file some days later. Once the underwriter approves, it's ready to close right? Not even close! It's this part of the process that differentiates the best loan originators from the rest. What happens now is a conditional committment letter is issued. The best originators initially submit the cleanest files thereby "Conditions" listed on the "Conditional Committment" are minimal. These conditions were submitted initially with the file. As suggested, a conditional committment is a commitment to lend (loan approval) with conditions. Those conditions are things like updated bank statement, clear copy of driver license, copy of marriage license, letter from parents explaining gift funds for purchase, and anything else that the underwriter needs to clear the loan.
At this point the borrower works with the originator to submit these final conditions. Only when the underwriter signs off on the submitted conditions with the conditional commitment become a clear commitment. You will hear that the file is, "Clear to Close"! This term should not be used lightly. Clear to Close is the greatest three words in Real Estate Financing! This essentially means that the file is out of underwriting and it's in the mechanical process of doc preparation and working with the title agency. Once the docs are ready they go out to the title company for proper closing and funding and title transfer may occur.
Now I hope I didn't lose you on this. I think it's important that you have a basic understanding of the lending process so that this next part makes a little more sense. I can't remember the last time I wrote a contract in the Fort Lauderdale or Broward County Real Estate Market that wasn't on the Far/Bar As-Is Contract. Revisions over the years yes but essentially the same contract. One key difference in todays contract is the language used in section 8 Page 2 Regarding Financing. Lines 92-94 address the loan commitment period. Notice that it doesn't mention anything about a conditional committment. Why is this important? Say a conditional committment was provided to the seller but one of the conditions could not be met? Maybe the loan originator thought he could get a letter explaining something on the file that underwriting would accept but now in the elenth hour the underwriter can not satisfy this condition? Lines 98-121 further discusses remedy with line 115 specifically stating scenarios in which the Seller may retain the deposit.
So it's absolutely imparitive that contracts are written to allow a lender enough time to do their underwriting. Personally I would make my loan committment period match up with the time period required to obtain my "Clear to Close". How much better is it to know that the file is out of underwriting at this point in the sale than it would be if there were outstanding conditions left to underwrite. Why risk a potential deposit loss or even a deposit dispute if you don't have to? This is why I took the time to write this. Buyer's and Brokers alike should understand this part of the process better as it has changed. Brokers should not be placing 15 day commitment periods in here because in most cases that's only enough time to get a conditional commitment. That's just not enough time to navigate the conditions process most of the time.
Please understand that this was written for basic knowledge. Every transaction or contract is different including the clients. There are nuances to each deal that can not be accounted for that will present themselves differently from what I spoke about here. I am NOT an attorney, I would never under any circumstance present this information as legal fact. Since 2003' I have worked tirelessly in either an Agent, Broker, or Broker Sales Capacity with hundreds of closed transactions. It's that experience that has guided my understanding of these things in addition to conversations I have had with attorney's I trust namely The Law Offices of Joseph L. Kohn in Coconut Creek, FL. Never under any circumstance take what you read on the internet as fact as this Blog was written from my opinion & perspective and nothing more. At ALL times, you should consult with your own attorney legal counsel and/or other industry professional.
If you are looking for an experienced Real Estate Broker Sales Associate in the Broward County and Fort Lauderdale Real Estate Markets please reach out to me personally at 561-929-4098. You may also email me or connect via Social Media at any of my links on my website at www.PaulsenProperty.com. My Blog page is also found there. Servicing the Broward and Fort Lauderdale Real Estate Markets since 2003. Waterfront homes in Gill Isles, Shady Banks, Tarpon River, Lauderdale Isles, and through out the rest of the Fort Lauderdale area is my specialty.