You get your loan approval and couldn’t be more excited – you’re on your way to becoming a homeowner. But, something stops you in your tracks – it says ‘approved with conditions.’
What does this mean and will you get fully approved? Are you going to lose your loan approval?
It’s not as devastating as it sounds – I’ll walk you through the steps below.
Approved with Conditions is Normal
First, know that approved with conditions is normal. The underwriter must ensure that you qualify for the loan without a doubt. This often means they underwrite part of your qualifications, but may not have everything they need to allow the loan to close quite yet. They let you know ‘hey you’re approved, but you must take these steps first.’
Approved with conditions is a good status. It means the lender underwrote the toughest part of your application – your qualifying factors. It also means there are a few other conditions they need you to satisfy before they can move you to the closing.
You’re one step closer to the closing.
What are the Conditions?
Everyone wants to know, what are the conditions? It depends. This isn’t a one-size-fits-all approach. Some of the most common conditions include:
- Further proof of income or employment – If there’s any doubt about the stability or consistency of your employment or income, underwriters may ask for more clarification. This is one of the largest factors of your approval, so they are extra cautious.
- Explanation of large deposits – If the underwriter can’t trace your deposits to your income or another known source, they’ll need proof of its origination. Each lender differs, but typically, any deposit over $500 without proof is a ‘red flag.’ Have paperwork proving any large deposits or avoid large deposits at least 2 months before you apply for the loan.
- An explanation for a gap in employment. If you had a large gap in employment, lenders may want to know why. A simple letter explaining the reason should suffice. Lenders want to know if it was a temporary situation or one that may reoccur and affect your ability to afford the loan.
- Proof of employment – Lenders often save the proof of employment for right before your closing. This way they know you are gainfully employed before you close on the loan.
- Proof of the home’s value – You can’t control when the seller allows the appraiser into the home, so the appraisal is often a condition. Lenders need to know there is enough collateral for them to loan you the money should you default on the loan.
If you get an approved with conditions letter, it’s a good thing! When you work with me, I’ll walk you through the outstanding conditions and how you can satisfy them. The faster we provide the lender with the satisfaction of the outstanding items, the faster you can get to the closing and get the keys in your hands.
