Approved with conditions
After mortgage pre-approval and contract acceptance, your loan is submitted to processing and underwriting. Before you get final approval, your loan will likely be approved with conditions. Once you satisfy the conditions, you’re in the home stretch and one step closer to closing!
What does approved with conditions mean for my mortgage?
Approved with conditions is just a formal way of saying you need to answer some questions or provide additional documentation for your loan to be submitted for final approval. For example, you might need to explain a recent withdrawal from your bank account or provide a copy of your homeowners insurance.
Examples of mortgage approval conditions
Before getting the clear to close, here are a few of the common mortgage approval conditions you may encounter.
- Income
You’ll be expected to verify your employment by showing how much you earn by providing recent income documentation such as paycheck stubs and W-2 forms.
- Home appraisal
As your lender, Guild will order a home appraisal to assess your property’s fair market value. The appraiser’s report includes details on a home’s general condition and a review of the surrounding area.
- Earnest money deposit
Also called “good-faith money,” an earnest money deposit is made in addition to the down payment to reassure the seller that you’re serious about purchasing a property. To verify your earnest money offer, provide a copy of the personal check, certified check or wire transfer, as well as a deposit receipt from the escrow company. You may also be required to provide a statement from your bank showing the money came out of your account.
- Homeowners insurance coverage
This can help protect your investment in the event of a disaster or unforeseen incident. Showing documentation of coverage for a property’s full or fair value is a requirement for mortgage approval. Proof can include a letter from the insurer certifying coverage, a copy of the insurance policy or a declarations page.
- Gift letters
Did you know that your down payment doesn’t necessarily have to come from your personal funds? Another form of help can come as gifted funds from family. If you’re receiving gift funds, you’ll likely need to submit a gift letter with proof of funds from the donor.
- Explanations of bank statements
Bank statements and other documents are how mortgage lenders like Guild assess your financial situation to determine loan eligibility. If transactions on your statements raise questions, you may need to explain what you’ve done to address them.
When are conditional approvals denied?
The best way to avoid a mortgage denial after conditional loan approval is to respond to requests for clarification and provide all documentation quickly. Also, any sudden changes to job stability, employment, and/or credit history can affect your loan approval. As you prepare for homeownership, resist making big purchases, applying for new credit and increasing your debt.
What to do if your approval with conditions gets denied?
If your loan is denied, your Guild loan officer will guide you on the steps it takes to resolve issues with your financial profile or credit before you re-apply for a loan. If the denial is due to mistakes on your credit report, you’ll want to correct those before you re-apply.
Do you have additional questions about what can affect your mortgage approval? Connect with a loan officer today.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.