A commitment letter is the lender's written, binding promise to make a loan on stated terms, if the conditions listed in the letter are met by a set date.
The commitment letter comes after the lender’s credit decision. It restates the loan terms and then lists conditions: an appraisal at or above a stated value, clear title, a survey, an environmental report, entity documents, evidence of your cash to close, no material change in your finances. It carries an expiry date and often a commitment fee.
It binds both sides once you sign and return it. The lender must fund if you meet the conditions in time. You may owe the fee and the lender’s costs even if you do not close.
The national bank lending limit rule shows how seriously banks take the document. Its definition of loans and extensions of credit includes a contractual commitment to advance funds, and a “qualifying commitment to lend” is a legally binding written commitment that was within the bank’s limit when it was made. A bank counts the promise before it funds a dollar.
Read every condition as a task with an owner and a date. A commitment that expires before the appraisal can be delivered is not worth much.
How it shows up in the data here
Individual commitment letters are not public. Banks do report the total of commitments they have made and not yet funded, on a call report schedule this site does not load; see unused commitment. To gauge whether a bank can hold a loan of your size before you reach this stage, use the legal lending limit estimate.
Go further
- Legal lending limit estimate: A rough largest single loan for a bank, from its capital.
- Legal lending limit estimate: The most a bank can lend to one borrower, from public capital figures. Always an estimate.
- How to place a commercial loan with a bank: A bank loan moves through the same stages every time. Knowing them tells you what the bank needs at each point, what its answer means, and where time is lost.
- The legal lending limit, explained: A bank may not lend more than a set share of its capital to one borrower. The rule explains why a large loan gets shared, and why a lender can say a request is too big for it.
Related terms
- Term sheet: A term sheet is a short written outline of the loan a lender is prepared to consider: amount, rate, term, fees and main conditions. It is usually not binding.
- Letter of intent (LOI): A letter of intent is a short, mostly non-binding letter that sets out the main terms two parties expect to agree on before the full documents are drafted.
- Unused commitment: The part of a legally binding promise to lend that the borrower has not drawn yet, such as the open amount on a line of credit or the unfunded balance of a construction loan.
- Legal lending limit: The most a bank may have outstanding to one borrower by law. For national banks it is 15 percent of capital and surplus, plus 10 percent more when the extra is fully secured by readily marketable collateral.
- Credit committee: A credit committee is the group inside a lender that decides on loans above the amount a single loan officer is allowed to decide alone.
- Rate lock: A lender's commitment to hold a quoted interest rate for a set number of days before closing, often backed by a deposit the borrower can lose if the loan does not close.
- Take-out loan: The permanent loan that pays off a construction loan, or the commitment from a lender to make that loan once the project is finished and leased.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.