What is Conditional Approval and its Conditions?

Conditional Approval

Are you planning to buy or refinance a home? If so, your realtor may ask you to get pre-approved for a loan before submitting an offer. However, your offers may get rejected constantly. In this case, you might want to consider conditional loan approval. Read on to find out what conditional approval is and its conditions.

Conditional Approval Explained

Conditional approval is not a product. It is a stage between mortgage submission to the underwriter and final approval. A lender issues conditional approval after they assess your income, credit report, and assets. Furthermore, your financial information is examined by an underwriter in detail. Once satisfied, they may issue conditional approval.

This approval is higher than prequalification. But, it is not as high as the verified or the final approval. Conditional approval is only granted after the underwriter:

  • verifies the information on your loan; and,
  • believes that you can repay the loan.

By the time you have the conditional approval, the lender may give you a set of conditions. So, you must satisfy these conditions to move forward with the loan application.

In other words, conditional approval means that the mortgage underwriter is mostly satisfied with the application. But some issues still need to be resolved and these issues are classified as conditions. So the conditional approval signifies that the loan shall be approved if the borrower meets the remaining conditions. However, please note that you are not yet assured to receive the funds needed to make the purchase.

What are the Conditions for a Conditionally Approved Loan?

The conditionally approved loans may vary depending on the case. However, there are some repeated themes in conditionally approved loans. These include:

  • missing and incomplete documents that may be needed for the funding process of the loan;
  • homeowner’s insurance policy copy;
  • verification of assets and income through bank statements and check stubs;
  • verification of income tax returns;
  • proof of mortgage insurance;
  • explanation of a recent deposit or withdrawal; and,
  • high-value asset appraisals such as jewelry and art

Conditional Loan Approval vs. Pre-approval

 Potential home buyers often mistake the conditional approval process with the pre-approval process. But, the main difference between the two is that the pre-approval comes first. Pre-approval occurs before the underwriting process. It is not as strict as the conditional approval process.

Conditional Approval

On the other hand, conditional approval comes after the pre-approval process. It is stronger than pre-approvals. Moreover, you are more likely to be approved for a loan if you meet the conditions successfully with conditional approval. This further makes it more attractive to sellers.

Contact us for more information about conditional approval and its conditions  or assistance with the home loan process.



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