How Is Conditional Approval Different from Preapproval? - Quicken Loans Zing Blog

As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.

When you inquire about qualifying for a home loan, you’ll likely hear the term “conditionally approved” but might not be sure what that means or how it differs from a preapproval. We’re here to explain so you can be in the know!

A conditionally approved loan is closer to closing than a preapproved one but comes with a few conditions, usually concerning documentation and income, that must be met before a client can be approved to close.

A conditional approval occurs once the client has provided the necessary documentation to get their loan set up, such as supplying the following documentation:

  • Employment and income verification
  • Pay stubs
  • Tax returns
  • Bank statements
  • Debt obligations (credit cards or loans)
  • Utility bills
  • Asset statements

This information is required before the loan is completely approved.

Conditional Approval vs. Preapproval

People often confuse conditional approval and preapproval when talking about mortgages.

Loans are preapproved by a Home Loan Expert who has reviewed your income and credit information. Your information must be verified and approved before a decision can be made.

“The preapproval is based on what the client tells the banker and their credit report information,” said Jennifer Davenport, product manager on the Quicken Loans Capital Markets team. “Conditional approval differs from preapproval in that the loan may not have been reviewed by an underwriter when preapproved.”

After your information is reviewed, you’ll receive a preapproval letter stating your eligibility for a loan up to a specified amount.

Conditional approval comes after preapproval and involves going a little deeper. An underwriter conducts a strict documentation review before your loan is conditionally approved.

“This documentation is reviewed by an underwriter, and provided the client’s information matches up with what was initially stated to the mortgage banker, they are conditionally approved,” explained Davenport. “This means that the loan is moving forward but there are or may be additional conditions that will need to be met in order to finalize and close the loan.”

If the conditions aren’t met, the client might not be able to close on the loan.

Conditions on a Conditional Approval

There are a few common conditions attached to a conditional home loan approval.

Additional documentation, such as pay stubs, paperwork for business income, and tax documentation, is often required for final approval.

This might also include written verification of employment from your employer or additional asset statements, depending on what’s needed for your loan.

Conditional approval can also require purchase agreement addendums. Title verification, an appraisal, an inspection and homeowners insurance are usually needed to verify the market price of the home, the loan-to-value ratio and other details.

This can also include confirmation that there are no unexpected liens or judgments on the home.

Denial of a Conditionally Approved Loan

Clients with a conditional approval for a home loan are at risk for denial if they fail to meet any of the conditions laid out by the lender.

Here are a few reasons why a client might be denied:

  • The underwriter is unable to verify the data provided by the client
  • The home the client is trying to purchase has an unexpected lien
  • The client has a judgment on their record
  • The home inspection or property appraisal came in with unexpected issues
  • The client experienced a decrease in income
  • The client had negative entries on their credit report

According to Davenport, conditionally approved loans “may also get denied based on the additional information that comes in. For example, maybe the client does not actually earn as much income as they initially thought or loses their job, or there are not enough assets, or clients open up new debt during the process and now their DTI (debt-to-income ratio) exceeds the product guidelines.”

If you’re looking to get a mortgage, the first step you want to take is to talk with a Home Loan Expert. Fill out this form to have a Home Loan Expert call you or call (888) 980-6716.

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This Post Has 16 Comments

  1. We are in underwriting. Our conditions included a judgement which was paid and needed proof of release. What are the chances of denial providing we showed proof of paid judgement?

    1. Hi Missy:

      You could potentially be denied for other reasons if anything about your credit, debt or income changes materially between now and the close of your loan. However, if you’ve paid the judgment and you have proof, that has satisfied the condition and you’re on the right track. Hope this helps!

  2. Underwritting guidelines say the debt to income ratio for the loan I have is 37 to 43 percent ……they could not use a certain type of u come I was receiving so I’m right at 43 …..all conditions were met……what are the chances my loan will be approved?

    1. Hi Melissa:

      If all conditions are met and nothing changes, you’re probably okay. Every lender’s policy is different but if you’re meeting their guidelines, you should be in good shape.

  3. I received a text message from Rocket Mortgage that, and I quote “the loan is approved we just need a PA to send down”. I understand to say that I have been approved for the loan. Am I understanding this correctly, that my loan has been approved?

    1. Hi Barbara:

      It means you are approved providing you meet the conditions of the loan and the house passes appraisal conditions. PA is purchase agreement. I’m going to have someone reach out, but you’re on the right track. Congratulations!

  4. Hello so I’m the primary person Of income what happens if the secondary person(wife) had switch jobs already. But before that they had verified the job verification part already once and we are about to close will they call again? If they do what would happen?? We are about to close 5 days from now

    1. Hi Randy:

      For the purposes of the mortgage, if you’re both on it, there is no real distinction between a primary and a secondary person. However, I would speak with the mortgage company and see what their policies are. You definitely don’t want the surprise at the closing table.

  5. We are in underwriting and they said it’s a conditional approval that we have to write out a few letters of explaination. We’ve sunk in 1025$ so far is there still a chance it can be denied and we lose all the time money and effort put forth??

    1. Hi, Scarlett. I’m going to have one of our home loan experts reach out to get more information. Thanks, and I hope you have a nice day.

  6. I was just sent a conditional loan approval. I’m reading the email and they are only asking me to verify a credit inquiry. I thought you needed to provide tax returns. Does that mean it will be approved once I submit this credit inquiry?

    1. Hi Neal:

      I’m going to get this over to our Client Relations team to reach out and look into this. I’m not in a position to comment on where you’re at with your loan process. What I can tell you is that the necessary documentation does vary depending on your situation on the type of loan you’re trying to get. I’m going to have someone reach out to determine what information you were given the and where you might be at.

      Thanks,
      Kevin

    1. Hi G:

      It depends on how you get your income, but typically it’s done with W-2s or 1099s and then assets are verified with bank statements. There’s more information within this article. Hope it helps!

      Thanks,
      Kevin

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