Have you applied for a home loan, only to be told you’re “approved – with conditions?” Find out what this means, and how you can complete your qualifications for a home mortgage loan.
If you have recently embarked on the home buying process and received conditional approval to buy a house, then you probably have a few questions, like “What is a conditional approval?” and “What happens now?”
Don’t panic. This is actually good news – you’ve made it through the main hurdle of the initial application stage, and are on your way to full mortgage approval. Being approved with conditions is simply a part of the standard procedure for many loans.
There are just a few more steps to get your mortgage loan approved and you’ll be able to start house hunting or make an offer on a home you’ve found.
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 (usually satisfiable by submitting extra documentation they’ve requested) they are going to be willing to approve your mortgage.
This isn’t a guarantee that your mortgage will be approved. Rather, being approved with conditions means the lender has fully reviewed your application, and is willing to finance your home purchase if you can meet certain criteria.
What Are Some Common Approval Conditions?
Normally, in the event of a conditional approval, your underwriter has already reviewed your financial documents. In most cases, they will have determined that the application is mostly fine but needs a little additional information.
Common approval conditions include:
- Updated 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)
- A letter of explanation for a recent large withdrawal
Earnest money proof and fully executed sales contracts are also common lender conditions. All of the above are just some of the most common approval conditions you may encounter and not an all-inclusive list.
It is important to keep in mind that a conditional approval is not a guarantee that you are approved for a home loan. There are instances when a borrower’s application may ultimately be denied even 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. One of the easiest ways to avoid a loan application rejection is by thoroughly preparing for the closing process and following up frequently with your loan officer to make sure you are submitting all the information needed by underwriting.
Does Being Approved With Conditions Have Advantages?
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).
Some people think that a conditional approval can be an advantage if you are looking to build your own home, as your builder may require conditional approval before construction can begin. Since most builders prefer assurances that the purchase/project is, in fact, going to pass the underwriting stage, however, a completed preapproval with underwriting already done as well is even better.
Does It Take Longer To Close After A Conditional Approval?
After receiving conditional approval, there is no set timeline for how long it will take to close on your new home. The conditional approval process itself can take anywhere from 1 to 2 weeks. However, once this process is complete, you can expect to close fairly promptly, since everything else has been finished already.To ensure a fast closing, it is in your best interest to resolve any issues that come up with underwriting sooner rather than later.
What Are The Next Steps After Being Approved With Conditions?
The next steps after being approved with conditions are contingent on what your lender needs from you. Your lender or mortgage company will tell you exactly what you need to provide in terms of documentation, or whatever else you need to do to complete the approval process.
Once you know what conditions need to be met, do your best to meet them quickly so things can run along smoothly. Your mortgage should be able to quickly move to the final approval stage after you’ve satisfied the conditions, and then you can prepare to close on your home.
Ready to Apply For a Mortgage?
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.