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When applying for a home loan, many people are approved with conditions. But they are not quite sure what it means. Thus, in this article, we’ll go over what approved with conditions actually means and what happens next.
If you have recently embarked on the home buying process and received conditional approval to buy a house, then you more than likely have a few questions. Typically, in this instance, borrowers may ask themselves, what is a conditional approval, and what happens now? Of course, these are valid questions. But, first and foremost, there is no need to panic.
The good news is that the loan has made it past the initial application stage, and being approved with conditions is simply a part of the standard procedure for many loans. Thus, to help you get answers and close on the home of your dreams, here is a brief overview of a conditional approval.
As suggested, a conditional loan approval means that your mortgage underwriter is mostly satisfied with your mortgage application. And as long as you can meet their pending conditions or submit the extra documentation requested, they are willing to approve your mortgage.
That said, it is not a guarantee that your mortgage will be approved. Instead, being approved with conditions means the lender is willing to finance your home purchase if you can meet certain criteria.
Normally, in the event of a conditional approval, your underwriter has reviewed your financial documents and has likely determined that your application is mostly fine but needs a little additional information.
Here, common approval conditions to keep an eye out for include income and bank statements (to verify your monthly income), additional paperwork (to meet specific loan requirements), verification of mortgage insurance, gift letters (for homebuyers using gift funds for their down payment), or a letter of explanation for a recent large withdrawal.
Earnest money proof and fully executed sales contracts are also common lender conditions. Note, these are just the most common approval conditions you may encounter and not an all-inclusive list.
As briefly mentioned, it is important to keep in mind that a conditional approval is not a guarantee that you are approved for a home loan. In fact, there are occasions when a borrower’s application may be denied after being initially approved with conditions.
However, this usually only happens if one or more of the conditions of your home loan is not met or not met in a timely fashion. Consequently, one of the easiest ways to avoid this is by thoroughly preparing for the closing process. It is also highly recommended that you follow up frequently with your loan officer and make sure you are submitting all the information needed by underwriting.
As you are likely aware, getting pre-approved for a mortgage is one of the first steps you should take before you start house hunting. Not only does a pre-approval help you determine your budget, but it also makes you more of a competitive buyer in hot markets (or in the event of a bidding war).
When this is coupled with a conditional underwriting approval, your bargaining position is even stronger, and sellers are more likely to see you as the more serious candidate. Alternatively, if you are looking to build your own home, your builder may require conditional approval before construction can begin.
Thus, a conditional approval is also advantageous here because most builders prefer assurances that the purchase/project is, in fact, going to pass the underwriting stage.
After receiving conditional approval, there is no set timeline for how long it will take to close on your new home. But be that as it may, a conditional approval can help to speed up the closing process since it tends to take less time to review/finalize the closing documents when a borrower is approved with conditions.
That said, the conditional approval process, itself, can take anywhere from 1 to 2 weeks, in some cases. However, once this process is complete, then you can expect your closing day to come shortly thereafter. Thus, to ensure a fast closing, it is in your best interest to resolve any issues that come up with underwriting sooner rather than later.
The next steps after being approved with conditions are contingent on what your lender needs from you. Of course, your lender or mortgage company will tell you exactly what you need to provide in terms of documentation or what you need to do to complete the conditional approval process.
Nevertheless, once you know what conditions need to be met, make sure you meet them quickly so things can run along smoothly. Ultimately, when your mortgage moves to the final approval stage, then you can prepare to close on your home.
Do you have questions about home loans or being approved with conditions? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
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