You finally received your home loan approval papers in the mail! While reading through it, you see that it says “approved with conditions.” What does that mean? Should you worry?

We are here to tell you that when your loan is approved with conditions, you should know that the lender merely wants to take extra steps to ensure that you are suitable for the loan you have applied for.

Here is what approved with conditions is and what it means for you:

approved with conditionsYour Initial Loan Has Been Approved

When your loan is approved with conditions, know that it has initially been approved. In this case, the lender wants to make sure that you are suitable for the loan. The underwriter reviewing your loan needs additional information before determining that all conditions have been satisfied and you are able to take on the loan.

There Are Two Types Of Conditional Approval

When your loan is approved with conditions, your particular circumstance will determine what type of conditional approval you experience. There are two types:

  • Prior-to-document conditional approval: Your lender needs more information before deciding to give you a loan. This usually means extra documentation in regards to finances.
  • Prior-to-closing conditional approval: You must meet a specified condition before the home can be closed on. For example, if you are selling your previous home and using its equity to purchase your new one, the lender will need to see proof of sale before closing.

You Will Be Required To Provide Extra Documentation

Regardless of what type of conditional approval you experience, you will be required to provide extra documentation. When you get a notice from your lender, provide all requested documentation to them as soon as possible! This will help the loan approval process continue and show the lender that you are serious about moving ahead with the purchase.

Documents you may be required to provide can include:

  • Gift letters, detailing where you received money for your down payment if it was provided by a family member or friend.
  • Letters of explanation, a brief document that is used to explain anything in your documentation that an underwriter may not understand, like gaps in employment.
  • Proof of employment, especially if you are self-employed or starting a new job soon.
  • Proof of sale, if you are using the sale of your previous home to fund the purchase of your new one.

If you have questions about the documentation that you are being asked to provide, don’t hesitate to reach out to your lender or realtor for clarification. The experts at Merchant of Homes have the knowledge and expertise to guide you through your purchase and help you with any questions you have. We work hard to ensure that your experience purchasing a home with us is excellent.

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