What is the term for a lender's agreement to make a loan to a specific borrower on a specific property?

The term “firm commitment” refers to a lender's agreement to extend a specific loan to a particular borrower for a designated property. This commitment is binding and indicates that the lender has completed the necessary underwriting process and is willing to provide the loan, subject to any outstanding conditions.

This term is significant in real estate transactions because it assures the borrower that the funds needed for the purchase are secured, allowing them to proceed with their acquisition plans. A firm commitment typically includes details about the loan amount, interest rate, and specific terms and conditions.

Other terms, although related to lending, do not capture this specific agreement as precisely. A "loan guarantee" often refers to a promise by a third party to cover the loan if the borrower defaults, while a "loan agreement" generally describes the terms of the loan, but does not convey the lender's binding commitment to provide the funds as a firm commitment does. "Mortgage assessment" is not a recognized term in this context and is likely a misunderstanding of related concepts. Thus, understanding the meaning of “firm commitment” is essential for grasping the lending process in real estate transactions.