Glossary

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Firm Commitment
A firm commitment takes place when a lender agrees to finance the purchase of property. The loan approval process can be lengthy. The process begins when the borrower provides the lender with a comprehensive detail of his or her financial position. This may include providing copies of paycheck stubs, tax returns, bank statements and verification of supplemental income. Upon receipt, the lender verifies the source of all financial information and obtains a credit report. Lenders then calculate the maximum loan amount that a borrower can qualify for. Lastly, lenders provide the borrower with a firm commitment to loan money for the home purchase. After receiving a firm commitment, borrowers can begin searching for a property that suits his or her needs. A lender's firm commitment is reassurance that the borrower has secured financing.