9 - What Does A Conditional Approval Mean?

Certified Mortgage Advisor
NMLS 1701021
Published 
November 24, 2019

What does a conditional approval mean?

This stage in the process can feel a little overwhelming and intimidating because an underwriter is involved and sometimes it's a little unclear. What does the underwriter want? Who are they? What are they asking for?

So let's walk through the flow here of how we get a conditional approval and really we'll break it down to show you it's really not that bad.

Step 1: Documents

So there are about four steps here in this process. So we have the documents that we asked from you for the pre-qualification or maybe some follow-up documents, some things like W2s or 1040 pay stubs. Maybe it's an ID. It's 1040 bank statements. Everything should be on that step.

Step 2: Underwriter

And then what happens is we're taking that along with your contract, and the loan estimate, and then we're going to send that to an underwriter. The underwriter is going to take all of the documents and they're going to compare them against government guidelines. The guidelines to be able to get approved for a mortgage.

Step 3: Needs list

So that underwriter is then going to come back with a needs list. This is where we have conditional approval. So the underwriter will review everything and they'll say, congratulations, you have conditional approval. All we need are a few extra items. It's very common for the underwriter to have a needs list that they request from you.

What is in the needs list?

So normally in your needs list, you're going to expect the appraisal. So that has already been worked on. We started working on that for you would also be probably going to be expected is a title report. And we'll be the ones to order the title report. So you don't even have to worry about that.

Homeowners insurance, so they'll ask for a declarations page and we'll instruct you on how to get that as well. And maybe they ask for something else. Maybe they want updated pay stubs, or they might have questions about employment that they just want to clear out. So basically what they're saying here is as long as we meet the needs list, then you have final approval for the loan.

So what we'll do is after the underwriter gives us the needs list, we'll send the needs list over to you and say, here's what we need from you. What you need to do is get those documents back within 48 hours. That way we can make sure that we're on time for closing.

Step 4: Final approval

So what we'll do is we'll take all of those documents the underwriter asks for. We'll send them back to the underwriter and then is where they're going to give us final approval. This is also called a clear to close. That means everything is done with a loan.

Underwriting and approval is not scary at all

So the underwriting process and conditional really aren't as terrifying as it seems. There are three main approval stages when you're going through this process and at the very beginning, you're getting pre-qualified. That's where we're taking a preliminary look and we know what the underwriter's going to look for. So we're making sure those documents are there. Then the underwriter is going to look at everything and give us conditional approval. They're going to see if we need any extra documents to finalize the loan, and then you get a final clear to close and everything is finished.

So it really is as simple as we're submitting documents in the very beginning, an underwriter is looking at those documents, seeing if we need anything else, and we submit the documents. If we miss anything and we have final approval.

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