Getting mortgage approval is a big deal, but when the papers come back, they have the word conditional written. What is the meaning of “conditionally approved loan?” Well, it does affirm that your loan is passed; however, the guarantee is not 100%. Still, it is much stronger than pre-qualification.
What is The Meaning behind a Conditionally Approved Loan?
A conditionally approved loan is a statement that one receives from the lender. It mentions that the lender has agreed to lend a specific amount of money to the potential applicant if his criteria are met.
However, the letter in no way guarantees that the applicant will definitely close the loan. Since the approval for the loan is conditional, it includes a list of factors that the borrower must meet before the loan is finalized.
Conditionally Approved Loan and a Pre-approval Letter – What Is The Difference?
What differentiates between the two is that conditional approval is a far strong indication of success than a pre-approval because the former is given only when an Underwriter is done checking through your income, credit report, and assets.
On the other hand, a pre-approval is sent before the submission to an Underwriter. So, the conditional loan approval letter is a more secure version to the seller since the buyer is close to a fully approved loan.
Mortgage Approval – Conditions
It is necessary to meet some criteria for a conditionally approved mortgage and submit documentation to the lender. Some examples include:
- Financial statements, as well as proof of income for the past few years.
- Information about the high-value assets you possess, such as art items or jewelry.
- Income and asset verification via bank statements or any other means.
- Mortgage verification homeowner’s insurance.
- Income tax returns.
Is It Better To Obtain a Conditional Loan Approval before Putting Your offer?
A conditionally approved loan has the power to enhance your chances of getting an acceptance compared to those who are pre-approved buyer candidates.
With conditional approval, you have already surpassed most part of the extensive loan paperwork in advance. So, a conditionally approved loan might get you to close within 10-15 days. It would not require 20-30 days. What quick closing does is get leverage for you to negotiate better.
Buying a home is a major leap towards stability. It may be stressful since there are so many things a layman does not know about.
Getting a conditionally approved loan fast-tracks the loan sanction process and minimizes the things that may go wrong with financing.
Few builders have made it mandatory to get conditional approval before starting the building process. So, this letter acts like a head start; the odds will be in your favor. If you want to know more about loans and the entire process, talk to one of the experts from Reddoor Funding.