Humber/Ontario Real Estate Course 3 Exam Practice

What does a typical mortgage commitment specify?

1. It is similar to a pre-approval

2. It outlines conditions like clear title

3. It uses a standard Financial Services Commission form

4. It applies exclusively to traditional mortgages

5. It guarantees loan approval

6. It requires no further approval

The correct answer is: It outlines conditions like clear title

A typical mortgage commitment specifies various conditions that must be met before the mortgage funds can be disbursed, and one of these key conditions includes having a clear title to the property. This means that the property must be free of any legal claims or liens that could affect the lender’s security interest. The commitment letter often includes other aspects regarding the mortgage, such as the loan amount, interest rate, and term, but the mention of conditions such as clear title is significant because it goes beyond the simple approval of financing; it ensures that the asset being financed is legally sound for both the borrower and the lender. By addressing this aspect, the commitment acts not only as assurance for the borrower but also protects the lender's investment. While other choices relate to aspects of the mortgage process, they do not capture the essential nature of what a mortgage commitment entails in terms of outlining specific conditions required for final approval and release of funds.