Are You Locked In After a Commitment Letter? (Simple Explanation)

You just got your mortgage commitment letter. Your lender congratulates you. Your agent says you're "clear to close." But then you see an ad for lower rates, or your friend mentions their lender is offering better terms.

Can you switch lenders now? Or are you locked in?

This question comes up constantly on r/FirstTimeHomeBuyer, and the confusion is understandable. The answer is more nuanced than most people think.

The Short Answer

No, you're not legally locked in. You can switch lenders after getting a commitment letter—but there are significant practical and financial consequences that might make it a bad idea.

Let's break down exactly what a commitment letter means and when it makes sense to walk away from it.

What Is a Mortgage Commitment Letter?

A commitment letter (also called a "loan commitment" or "clear to close" letter) is a formal document from your lender stating they will loan you a specific amount of money, subject to certain conditions.

What it typically includes:

Loan amount
Interest rate
Loan type (conventional, FHA, VA, etc.)
Expiration date (usually 30-90 days)
Conditions you must meet before closing
Property requirements that must be satisfied

What it means:

The lender has reviewed your finances and approved you
They've ordered an appraisal (usually already paid for by you)
They're ready to fund your loan at closing
Your rate is "locked" for a specific period

What it does NOT mean:

You're legally bound to use this lender
You can't back out
The lender absolutely must give you the loan (there are still conditions)

Can You Switch Lenders After Getting a Commitment Letter?

Technically, yes. There's no law preventing you from switching lenders at any point before closing—even after getting a commitment letter.

But here's the catch: Switching comes with real costs and risks.

What You'll Lose If You Switch

1. Your Application Fee ($300-$500)

Most lenders charge an upfront application or processing fee when you apply. This is non-refundable.

What you lose: $300-$500

2. Your Appraisal ($400-$700)

The appraisal you already paid for belongs to your current lender. Your new lender will require a fresh appraisal.

What you lose: $400-$700

Exception: In some cases, you can transfer an appraisal between lenders if:

It's recent (within 120 days)
The new lender accepts transferred appraisals
You pay a $75-$150 transfer fee

Ask both lenders about appraisal transfers before switching.

3. Your Credit Inquiry Fee (if charged)

Some lenders charge for pulling your credit report.

What you lose: $25-$75

4. Lock Extension Fees (if your rate was locked)

If your rate lock expires while switching lenders, and rates have gone up, your new lender's rate might be higher than your original locked rate.

What you lose: Potentially 0.25-0.5% higher rate for the life of the loan

On a $400,000 loan, a 0.25% higher rate costs you:

~$60/month more
~$21,600 over 30 years

5. Time and Risk

Time: Starting from scratch with a new lender adds 3-6 weeks to your timeline.

Risk: If you're under contract with a home purchase, switching lenders could:

Cause you to miss your financing contingency deadline
Force you to request a closing extension (seller may say no)
Result in losing your earnest money if you can't close on time
Cause the seller to walk away and accept another offer

Total Potential Cost of Switching: $1,000-$2,000 in hard costs, plus significant delays and risks.

When It Makes Sense to Switch Lenders

Despite the costs, there ARE situations where switching makes sense:

1. You're Saving Significant Money on Rate

Rule of thumb: Only switch if you're saving at least 0.5% on your interest rate.

Example:

Current rate: 7.0%
New lender rate: 6.5%
Loan amount: $400,000

Monthly savings: ~$120/month
30-year savings: ~$43,200
Cost to switch: ~$1,500

Payback period: ~12 months

In this case, switching makes financial sense if you plan to stay in the home for more than a year.

2. Your Current Lender Is Being Shady

Red flags that justify switching:

Lender changed your rate or terms without explanation
They're not returning calls or answering questions
They've missed promised deadlines repeatedly
They're adding unexpected fees at the last minute
You discover they have terrible reviews and frequent complaints

Trust matters. If your gut says something is wrong, listen to it.

3. Your Loan Was Denied or Conditions Are Impossible

If your "commitment" letter has conditions you can't meet, you may need to find a new lender who can work with your situation.

Common impossible conditions:

Requiring you to pay off debt you can't pay off
Asking for documentation you can't provide
Setting property requirements the home can't meet

4. You Haven't Signed a Purchase Contract Yet

If you're still house shopping and just got pre-approved (not in contract), switching lenders has almost zero downside. Shop around as much as you want.

When You Should NOT Switch Lenders

1. You're Within 2 Weeks of Closing

Don't do it. The risk of missing your closing date is too high.

Even if a new lender promises they can close in 14 days, there's too much that can go wrong:

Title issues
Appraisal delays
Underwriting questions
Final verification delays

Switching this late almost always causes closing delays.

2. The Rate Difference Is Small (< 0.25%)

Not worth it. The hassle, stress, and risk of delays outweigh the small savings.

On a $400,000 loan, a 0.25% rate difference saves you ~$60/month. After accounting for the $1,500 cost to switch and the stress of starting over, it's rarely worth it.

3. Your Current Lender Has Already Started Underwriting

Once underwriting begins, your lender has invested significant time reviewing your file. Walking away at this stage wastes everyone's time and burns bridges.

When is underwriting? Typically 3-5 days after you submit your full application and documentation.

4. You're Buying in a Competitive Market

If you're competing against other buyers, having a commitment letter from a known, reputable lender is an advantage.

Switching to an unknown lender might:

Make your offer less attractive
Cause the seller to have doubts about your financing
Give competing buyers an edge

How to Switch Lenders (If You Decide To)

If you've decided switching makes sense, here's how to do it smartly:

Step 1: Get a Written Loan Estimate from New Lender

Before you do anything, get a Loan Estimate (required by law within 3 days of application) from the new lender showing:

Exact interest rate
All fees and costs
Estimated closing date

Compare this side-by-side with your current commitment letter.

Step 2: Ask About Appraisal Transfer

Contact both lenders and ask:

Can the existing appraisal be transferred?
What's the transfer fee?
How long does the transfer take?

This could save you $400-$700.

Step 3: Notify Your Current Lender

Be professional. Simply say:

"I've decided to go with another lender that better fits my needs. Please send me a refund of any refundable fees. Thank you for your time."

You don't owe them a detailed explanation.

Step 4: Tell Your Real Estate Agent and Seller

Immediately inform your agent that you're switching lenders. They'll need to:

Notify the seller
Potentially request a closing extension
Update the contract timeline

Warning: Some sellers may try to back out if they think your financing is unstable. Have your new lender provide a strong pre-approval letter ASAP.

Step 5: Move Fast with New Lender

Submit all documents the same day you apply
Respond to requests within hours, not days
Call daily for status updates
Keep your agent informed of progress

Speed is everything when switching lenders mid-transaction.

What About Rate Lock Extensions?

If you're not switching lenders but just need more time, you can request a rate lock extension.

Typical costs:

0.125-0.25% of loan amount per 15-day extension
Some lenders offer one free extension
Extensions typically available for 15, 30, or 60 days

Example: $400,000 loan with 15-day extension at 0.125% = $500 fee

The Smart Way to Avoid This Dilemma

The best way to avoid the "should I switch lenders?" dilemma is to shop around BEFORE you apply.

When to shop for lenders:

When you first decide to buy - Get pre-approved by 2-3 lenders
After you're under contract - Immediately apply to your chosen lender
Never wait until you're close to closing - You have no leverage

Questions to ask each lender:

What's your average time to close?
What rate can you offer me today?
What are all your fees? (get Loan Estimate)
How many loans do you close per month?
Can you provide references from recent buyers?
Do you sell your loans or service them yourself?

Bottom Line: You're Not Locked In, But Think Twice

The legal reality: You can switch lenders anytime before closing.

The practical reality: Switching after getting a commitment letter costs $1,000-$2,000, risks delays, and could jeopardize your home purchase.

When it's worth it:

Saving 0.5%+ on your rate
Your lender is being shady or unprofessional
You're not yet under contract
You're more than 3 weeks from closing

When it's not worth it:

Saving less than 0.25% on rate
You're within 2 weeks of closing
Your current lender is reliable and responsive
The switching costs outweigh the savings

Make Smarter Offer Decisions from the Start

Before you even get to the lender stage, make sure you're making smart offers that you can actually afford. Use offer.guide to analyze properties, understand fair market value, and create offer strategies that won't stretch your budget.

Get Your First Property Analysis Free →

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