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What is a conditional approval?

November 5, 2021

When you’re ready to buy or build a new home, you’ll submit a loan application to a lender. The lender will then review the application and hopefully, if everything on your application looks up-to-speed, they’ll issue you a pre-approval letter. You’ll use this letter when you’re searching for your new home. Once you’ve found the property for you, you’ll submit the remaining documentation needed for your loan, your lender will review all the details, and determine if you’re qualified for financing. If they find that you are, they’ll issue a conditional approval. While this is very exciting, there are still more steps you’ll need to take to reach the final loan approval. Let’s get into the details of what a conditional approval is and why it matters.


What is a conditional approval?

A conditional approval is an approval that is issued by the lender when your loan application has been verified and has been found to meet the qualifications of the loan, pending some conditions. In the mortgage industry, conditions are additional details or documents that are required by the lender in order to officially approve your loan. You’ll want to work closely with your Client Manager to gather all the required conditions and send them to your lender as soon as possible. Delays in sending this information over could result in a delay in closing.


Examples of mortgage conditions

Some conditions you may come across with your conditional approval are:

  • Proof of mortgage insurance
  • Appraisal needed
  • Employment verification
  • Letter of explanation
  • Gift letters


Can a conditionally approved loan be denied?

A loan with a conditional approval can end up being denied in the case that you are unable to meet the conditions outlined in the conditional approval. To avoid this, make sure that when you receive your conditional approval, you take the initiative to gather all the conditions as quickly as possible. Some people might thing that once the conditional approval comes in, their job is done, but that is far from the case! It’s critical that you stay on top of your loan, especially when conditions are out for you to complete. This is when you can determine how quickly your loan is approved and funded.

While a receiving a conditional approval can be very exciting, there is still work to do after the fact! If you’re looking to get started with home financing, you can get started here!