There is a document that sits between your term sheet and your closing, and most investors do not give it the attention it deserves. It is the commitment letter, and unlike the term sheet you got at the quote stage, the commitment letter is the lender’s real, underwritten answer on your fix and flip loan. It says the file has been reviewed, the loan is approved, and here are the exact conditions you have to clear to fund. This guide explains what a fix and flip loan commitment letter actually contains in 2026, how it differs from the term sheet, which conditions matter most, and how to read one so nothing on your closing day is a surprise.
We arrange fix and flip and bridge loans for investors across Pennsylvania and additional states, and the commitment letter is the point in the process where a deal stops being a maybe and becomes a checklist. Read it well and your closing is a formality. Skim it and you can find out at the table that a condition you never noticed is holding up your funds.
Commitment letter versus term sheet
Start with the distinction, because investors mix these up constantly. A term sheet is an early quote. It comes out before real underwriting and it tells you the shape of the deal: rate, points, loan-to-cost, term, and the broad strokes. It is not a promise to lend. We cover how to read that earlier document in our guide to how to read a fix and flip loan term sheet. A commitment letter comes later, after the lender has actually underwritten your file, pulled credit, reviewed the property, and checked your experience and reserves. It says the loan is approved subject to a specific list of conditions. The term sheet describes the deal. The commitment letter commits to it, if and only if you satisfy what it lists.
That word, subject, is the whole point. A commitment letter is almost never unconditional. It is an approval with a homework list, and the homework is what turns the commitment into funded dollars.
What the commitment letter actually contains
A fix and flip commitment letter restates the final loan terms and then lays out the conditions in two buckets. First are the loan terms themselves: the final loan amount, the split between purchase money and rehab holdback, the interest rate, the points, the term length, any interest reserve, and the maturity date. These should match the term sheet you agreed to, and if they do not, the commitment letter is where you catch the drift. Second, and more important, are the conditions to close and the conditions to fund.
Conditions to close are the items you must satisfy before the loan can fund at all: clear title, a satisfactory appraisal or valuation, proof of insurance, your entity documents, proof of reserves and cash to close, and a signed scope of work on the rehab. Conditions to fund the rehab holdback come after closing and govern how you draw your renovation money: the draw schedule, the inspection requirements, and the documentation each draw needs. A good commitment letter spells both out so you know exactly what stands between you and your money, at closing and at every draw after.
The conditions that trip people up
A few conditions cause more last-minute scrambles than the rest, so read these lines first. The appraisal or valuation condition is the big one, because the whole loan is sized off the after-repair value, and if the valuation comes in under your number the loan amount can shrink and force more cash to close. The insurance condition is a quiet closing-killer, because a builder’s risk or vacant-property policy with the right coverage and the lender named correctly takes longer to bind than investors expect. The reserves and cash-to-close condition catches borrowers who counted on the loan covering more of the deal than it does. And the entity and guaranty conditions matter if you are closing in an LLC, which most flippers are. We cover that entity piece in our guide to the fix and flip loan for an LLC, and the personal guaranty that comes with it.
None of these conditions are unusual. They trip people up only because the borrower did not read them until the days before closing, when there is no time left to fix a gap. The commitment letter hands you the entire list days or weeks early. The whole value of reading it carefully is that you can clear the conditions on your schedule instead of the closer’s.
A worked example
Let me put numbers on how the commitment letter frames a real deal. Say you are buying a flip for 160,000 dollars with a 60,000 dollar rehab, and the after-repair value is 300,000 dollars. Your commitment letter approves a loan at 90 percent of purchase and 100 percent of rehab, so 144,000 dollars of purchase money plus a 60,000 dollar rehab holdback, for a total loan of 204,000 dollars against a 300,000 dollar after-repair value, which is a 68 percent loan-to-after-repair-value. The letter then states your cash to close: the 16,000 dollar purchase gap, plus closing costs, plus the reserves the lender requires you to show. It lists the appraisal condition that supports the 300,000 dollar value, the insurance condition, and the draw schedule that governs how the 60,000 dollar rehab holdback comes back to you in stages. Reading that, you know your exact cash to close, the value the deal depends on, and how your rehab money flows, all before you sit down at the table. We break down the full cost side in our guide to fix and flip closing costs, and you can model the deal on our deal calculator.
How to read one the right way
Work through a commitment letter in a fixed order. First, check the terms against your term sheet, line by line, and question any difference in rate, points, loan amount, or holdback. Second, read every condition to close and, for each one, write down who has to do what and by when. Third, read the draw and inspection conditions so you understand how your rehab money comes back before you spend your own cash on the work. Fourth, note the expiration. Commitment letters expire, and a rate or a whole approval can lapse if you drift past the date. If anything is unclear, ask before you sign, not after. The lender expects questions on a commitment letter. Silence is not agreement, it is just risk you have not read yet.
What happens if a condition cannot be cleared
Sometimes a condition on the commitment letter turns out to be a problem, and it is better to know how that plays out than to hope it never happens. If the appraisal comes in below the after-repair value the loan was sized on, the lender will usually reduce the loan amount to hold the same loan-to-after-repair-value, which means you either bring more cash to close or renegotiate the purchase. If an insurance binder is not in place by the closing date, the closing moves, it does not proceed without coverage. If your reserves fall short of what the letter requires, the lender can hold funding until you document the cash. None of these end the deal by themselves, but each one costs time, and time on a fix and flip is holding cost you are paying whether the loan funds or not. This is the real reason to read the commitment letter the day it lands: every condition on it is a place the deal can slow down, and the earlier you see the gap, the more room you have to close it before it costs you a rate lock, an extension fee, or the purchase itself.
The bottom line on the commitment letter
A fix and flip loan commitment letter is the lender’s underwritten approval, and it commits to your loan only on the specific conditions it lists. It is the difference between a quote and a real yes. Everything that can delay or resize your loan, from the appraisal to the insurance to your cash to close, is written on it in advance, which means the borrowers who close smoothly are simply the ones who read the letter the day it arrives and start clearing conditions immediately. Treat the commitment letter as your closing checklist rather than a formality, and the closing table holds no surprises. Skim it, and the surprises find you.
Want us to walk through a commitment letter with you and flag the conditions worth clearing first? Send it through our contact page or call 412-990-2941. You can model the deal on our deal calculator, and you can see how we structure rehab financing on our fix and flip and bridge loan page.
FMC Capital is a Pittsburgh-based licensed mortgage brokerage, NMLS #1840537. This article is for educational purposes only and is not a commitment to lend, an offer of credit, or financial advice. Fix and flip loan commitment letters, conditions, rates, points, and qualification standards vary by lender, property, borrower, and market, and are subject to change at the time of application.