What is conditional approval? It simply means your lender is agreeing in principle to give you a home loan under certain conditions. You must meet the lender’s requirements before receiving the funds. These conditions may vary depending on several factors.
Failure to meet said conditions can cause your loan to fall through!
What Does Conditionally Approved Mean?
Conditionally approved means that the mortgage approval is almost done but would require additional documents to grant the same.
For example, you apply for a house loan worth $200,000. On submitting the documents the lender agrees to give you the loan. But the lender requires more documents like credit card statements, and employment details in order to grant the loan.
In short, conditionally approved means the approval is pending until all conditions are met.
Common Approval Conditions
The lender would approve the loan only when all conditions are met. In order to fulfill the condition he might ask for certain documents.
- Additional documentation: This includes documents like employment history or government identification documents.
- Income documents: This includes documents such as bank statements, and income tax papers.
- Credit check: These would include documents like the credit card statement, repayment of credit card records, etc.
- Investment documents: The lender may ask for investment documents like the share certificate, or other property investment papers.
Advantages Of A Conditional Loan Approval
Conditional loan approval comes with several benefits
- Confirmation of approval: Primarily, conditional approval increases the chance of approval and lets you prepare for your new house.
- Faster processing: A conditional loan approval is often processed faster, as the lender only needs to verify the conditions.
- Flexibility: As you are about to get the approval, the conditional loan will let you negotiate better loan terms.
- Reduced stress: Once you get conditional approval can reduce the stress of the uncertain application process.
Comparing Mortgage Approvals
Below are the different types of Mortgage approval
- Pre-approval: Pre-approval is the prime step in the process of application. During this process, the basic documentation has been shared with the lender for its verification process. Based on verification it may have chances to get rejected too.
- Conditional approval: This could be the next step where the lender would agree to the loan but would need more documents. These documents could be related to personal identity, income proof, or employment history. Once you provide these essential documents, you can receive final approval.
- Final approval: After all the document verification you reach the final approval stage. Here, the lender confirms your loan on the property.
When Are Conditional Approvals Denied?
Conditional approvals give borrowers a chance to provide additional documents for loan approval. Some common reasons for denial can be as below:
- Inability to provide additional income documents or employment data
- Past record statement of his bank or credit card
- Repeated missed payments, and debts for a longer time
- If the lender finds any structural issue in the property location or seller’s dispute then the approvals can be denied
- Incomplete or inaccurate information can lead to one of the main reasons for approval denial
How Long Does It Take To Close After Conditional Approval?
There is no fixed time period to close the conditional approval process. It totally depends on several factors including the lender’s requirements, and the borrower’s ability to fulfill the conditions.
In short, conditional approval is a stage where the lender accepts the application but asks for additional documents for loan granting. After providing all the necessary documents the approval becomes final.
Frequently Asked Questions
How many days before closing do you get mortgage approval?
There is no fixed time period to close the conditional approval process. It totally depends on several factors including the lender's requirements, and the borrower's ability to fulfill the conditions.
Is conditional approval a good sign?
Yes, it is good sign for borrowers seeking a loan or credit.