Conditional Approval vs. Pre Approval


BY The Lenders Network

conditional loan approval

2 minute read

If you’ve been given a conditional approval for a loan you’re probably wondering how it differs from a pre-approval.

In this article we’re going to tell you what a conditional approval is and how it differs from a pre-approval.

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What is a Conditional Approval?

A conditional approval means you have been approved for a loan once certain conditions are met. These conditions may be that you sell your current home, provide more documentation, pay off an account, or settle an outstanding balance.

Here is an example of a conditional approval.

You’re a homeowner with a mortgage loan and you want to purchase a new home and sell your current home.

Because your debt-to-income ratio will not allow you to be responsible for your current mortgage and a new payment. A lender will issue a conditional approval. The condition being that you must sell your current home before you can close on a new loan.

Conditional Approval vs. Pre-Approval

A mortgage pre-approval, or unconditional approval, means that you are pre-approved for a mortgage without any conditions. Usually this is a stage in which the loan is ready for processing and all required documentation has been submitted to the lender.

Common Loan Approval Conditions

Documentation Condition

One of the more common reasons for a conditional approval is the need for additional documentation. There are several pieces of information your lender requires in order to process your loan application.

W2’s, tax returns, pay-stubs and bank statements are required before processing your application. Your loan officer will be able to list you all documents that you need.

Sell Your Home First

If you currently have a mortgage and need to sell your home to be able to afford the new mortgage payment you’ll be issued a conditional approval. The condition being that you must sell your current home before you will be approved for the new home.

Denial After Conditional Approval

If you fail to satisfy the condition laid forth in your conditional approval your loan will be denied. As with any mortgage there are unforeseen issues that could arise causing your loan to be denied even if you meet the conditions from your lender.

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