What Is a Conditional Mortgage Approval?

Receiving a conditional approval for a mortgage, or commonly referred to as a pre-approval, means the underwriter has reviewed certain financial information from you, some of it may be verified but not always depending on the lender and determined you meet the general loan requirements. However, a few conditions still need to be met before your mortgage can officially be approved.

The conditions that need to be met often include providing additional documentation, such as proof of income, bank statements, or verification of employment. The underwriter may also require a satisfactory appraisal of the property or clarification of specific details related to your submitted financials.

Meeting the conditions during the underwriting process will help you secure a mortgage to move forward with a home purchase or refinance. Let’s dive deeper into what conditional pre-approval means, common conditions to expect, and how to prepare.

When will you receive a conditional mortgage approval?

A conditional pre-approval is usually issued after an underwriter determines you’re a good candidate for a mortgage based on the information you provided within your pre-approval application. A conditional pre-approval from a lender will be issued with pre-approval letter that you can provide your agent or potential sellers to show them you’re on track to secure financing.

What does a conditional mortgage approval mean?

The conditional pre-approval means a lender will provide a borrower with a certain amount of money for a mortgage after the borrower meets all the required conditions. A conditional pre-approval doesn’t guarantee you’ll be approved for a mortgage, but it does mean you’re on track to be approved. Once the lender confirms all conditions listed in the conditional approval have been met, the mortgage can be approved.

What conditions need to be met?

Lenders usually require borrowers to meet the following conditions before granting loan approval:

• Proof of income through bank statements, employment records or tax forms
• Proof of assets such as savings, brokerage accounts or other real estate
• Verification of loan eligibility if applying for a specific loan program (VA, USDA, etc.)
• Proof of an active homeowners’ insurance policy
• Proof of gifted funds with a gift letter if using them to fund part or all of the home purchase
• Provide the property address
• Address issues with the property title
• Proof of home appraisal to show the home’s value

What happens after you get conditionally approved?

Once you get conditionally pre-approved, you and your lender engage in a series of steps as part of the underwriting process to turn your conditional pre-approval into an unconditional approval — meaning all conditions are satisfied and your loan is approved. Here’s a quick overview of what happens after you receive a conditional approval:

1. The lender notifies the borrower of the conditions that must be met, and provides a timeline to satisfy those conditions. 
2. The borrower takes the necessary actions.
3. The underwriter determines loan approval or denial.
   • If approved, you’ll be “Clear to Close”, indicating underwriting is complete, and receive a letter of commitment detailing the terms and conditions of the loan.
   • If denied, you’ll receive a letter of adverse action explaining the specific reason (or reasons) for the denial.
4. The lender sends the borrower a Closing Disclosure to review within three business days of closing on your mortgage loan.
5. The borrower verifies the disclosure is free of errors and discrepancies, before signing to finalize the loan. 

How long does it take to close after a conditional pre-approval?

It usually takes 1-2 weeks for a mortgage approval after receiving a conditional pre-approval. However, your timeline to close can change depending on how long it takes you to provide the documents needed to satisfy the conditions in your conditional approval. For example, if your lender requests business tax forms, but you only have individual tax forms available, it might take a few extra days to get a copy of your business tax forms from your accountant. Make sure you understand exactly what documents your lender needs to avoid delays.

Is a pre-qualification a conditional mortgage approval?

A pre-qualification is not a conditional mortgage pre-approval. It’s a preliminary step toward getting approved. Getting pre-qualified means a lender has assessed your self-reported financial information, such as your pre-tax income and credit score, and determined how much you might be able to borrow. However, this information hasn’t been verified by the lender, which means there’s no commitment on behalf of the lender to provide you with a mortgage loan. Pre-qualification is a quick, informal way to understand your loan eligibility before you begin shopping for homes to buy.

*Zillow Home Loans; an equal housing lender. NMLS #10287