What does conditional loan approval mean?

December 13th, 2018

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Conditional Approval Mortgage

So you’re applying for a mortgage and you get conditional loan approval? What is that? The loan approval conditions, what do those mean?

What is a conditional approval?

A conditional approval is a step between pre-approval and closing. It means your loan approval is subject to conditions that must be met before the loan can close.

An underwriter investigates and verifies to make sure there are no mistakes or discrepancies. If you received conditional approval, the underwriter will make sure your conditions have been met in order to offer final approval on your loan.

What can lead to conditional approval?

Here are a few examples of conditions that might be listed on the conditional approval for your mortgage.

Unfinished appraisals.

Loan approval depends, in part, on the appraised value of the property. This affects the loan-to-value ratio. Perhaps your appraisal hasn’t reached the underwriter yet or it needs correction. Maybe additional comparable sales need to be included in your appraisal.


If you’re selling one home to buy another, odds are good you may still have some mortgage left to pay on the first house. Until it sells, you’ll still have that debt as a liability. This also factors into your debt-to-income ratio and affects your eligibility for the loan. Your conditional approval may require that debt be paid off.

Negative items on your credit report.

Sometimes a piece of information on an applicant’s credit report is damaging enough to cause loan application rejection. The item may be an error like a judgment that was paid but not reported as paid. Or there may be something that can quickly be resolved such as paying a collection account.

Waiting on a deposit.

Sometimes getting a down payment together means moving around money from several banks or cashing in investments. Part of the underwriter’s job is to verify the source of all the funds. Once the funding sources check out, your condition is met.

Employment verification.

How fast an employer completes the verification and provides it back to the underwriter can impact the closing date. Timeframes can range from a couple of days to a week or longer. It’s always a good idea to let your employer know when such an important phone, email, or verification request letter might be coming.

What You Should Do About Your Conditional Approval

Your final approval and closing could be jeopardized by unmet conditions. The keys to passing this phase are good communication with your loan officer and their team. Resolve all issues as quickly as possible. Make sure your loan officer is in the loop at every stage.

Contact me to discuss your mortgage scenario, mortgage rates, or other mortgage questions. Click here to schedule a call. Or you can email me directly.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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