What is a Conditionally Approved Mortgage

Conditionally Approved Mortgage Letter

Consider the following scenario: you’ve worked hard for years, putting as much of your hard-earned money into the bank as possible. You’ve prudently maintained your credit and amassed a FICO score of 800. You’ve opted for home cooked dinners, nature walks, and snuggling up with your significant other while watching the latest popular movie on Netflix instead of dining at fancy restaurants or spending nights out on the town with friends. Finally, you’ve saved enough money for a down payment on a house without having to go into your emergency reserves. You choose a realtor, and he or she advises you to first get pre-approved for a loan. So you call a lender, who offers you a pre-approval letter after you answer a few questions about your income, assets, credit, and liabilities. You hand it over to your realtor and believe you’re done. When the ideal home becomes available, you rush to make an offer and cross your fingers! Your Agent calls the next day with terrible news: the seller has already chosen a “better qualified” buyer. You’re upset and frustrated, and you’re wondering how someone could possibly be better qualified. The other buyer may not be more qualified but they did go further down the loan process than you did. You only had a pre-approval, whereas they obtained a conditional loan approval

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Definition of Conditional Loan Approval?

A conditional loan approval is a statement from a lender stating that the lender is willing to lend a certain amount of money to a potential borrower if certain criteria are met. The letter or form, on the other hand, does not guarantee that the borrower will be able to close the loan. The letter will include a list of conditions that must be met before the loan can be finalized, such as an acceptable appraisal and title report that confirms the property’s valuation and features fit the lender’s requirements.

What is the difference between a conditional loan approval and a pre-approval letter? 

The main distinction is that a conditional loan approval is given only after an Underwriter has looked over your income, assets, and credit report, whereas a pre-approval is given prior to submission to an Underwriter. After obtaining an application, pulling credit and running automated underwriting findings, loan officers may offer you a pre-approval letter. As a result, the conditional loan approval offers more security to the seller because the buyer is closer to a fully approved loan.

Conditionally approved meaning

The meaning of “Conditionally approved” is that your file and the required documentation has been submitted to an Underwriter and the loan has been approved based on being able to satisfy the remaining conditions required by the Underwriter.

Why should you obtain a conditional loan approval before making an offer on a home?

  1. A conditional loan approval could make the difference between your offer being accepted and those of other pre-approved buyer candidates.
  2. A pre-approval will require more offers than a conditional loan approval before one is accepted.
  3. Because you have already completed most of the loan paperwork in advance, a conditional loan approval might get you to close in just 10-15 days, rather than 20-30 days. A quick closing can create leverage for you in negotiations.
  4. Buying a home may be a stressful experience since there are so many unknowns, especially if you currently own a property and your purchase is based on the sale of that home. To help eliminate stress, obtaining a conditional loan approval expedites the loan process and reduces the number of items that can go wrong with financing.
  5. Some builders will require a conditional approval before starting the building process. So, by getting a head start, you will compete better with other offers on the same lot.
    ths. All credit paperwork must be dated within 90 days of funding, according to most lenders.

Conditionally approved

When representing a buyer in a house purchase, some realtors will encourage their clients to get a conditional loan approval to give them the most leverage when negotiating the best price for them. However, depending on how hot the real estate market is in that particular area of the country, the conditional approval process may not be necessary. Although a conditional approval does provide more leverage for the buyer, it also requires more work for the client up front prior to putting in an offer. So, always talk with your realtor and mortgage consultant to determine the best course of action to provide the easiest and best path forward to obtaining your next home.

Contact the Cain Mortgage Team today to get your mortgage pre-approval today.

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