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In this video, the host introduces the term "commitment letter" as a binding offer from a lender that specifies the mortgage amount, interest rate, and repayment terms. It is conditional, requiring certain criteria to be met by the borrower within a specified time frame. Common conditions in a mortgage commitment letter include providing additional documents, maintaining credit score and income, obtaining homeowner's insurance, and making required down payments. A smooth and quick transaction relies on meeting these conditions.