 Sam
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 Posted: Fri Apr 09, 2004 12:40 am Post subject: Loan commitment: How it differs from monthly commitment |
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A loan commitment refers to a written document which states that a mortgage company or lender will be offering a certain loan amount to a borrower at a certain rate of interest for a specific loan period. The loan commitment states the terms and conditions of the mortgage transaction along with the closing date of the loan.
A loan commitment is somewhat different from a monthly commitment. Monthly commitments include the monthly payments that a borrower should pay legally since he had taken the mortgage loan. The monthly commitment includes a part of the principal loan amount, the interest, the payments towards property taxes and insurances required in mortgage.
For example: Jack wishes to buy a home with a mortgage loan and has talks with Joseph, the lender. After the approval of the loan application submitted by Jack, Joseph should offer him the required loan amount as stated in the loan commitment. Jack will have to repay the loan in monthly payments of $2000. These monthly payments are actually the monthly commitment made by Jack to his lender.
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