by Aidan Kang, CFA
Senior Writer
UPDATED: July 27, 2021

When buying a home, you hear about pre-qualification and pre-approval processes. These are part of getting a mortgage loan. However, there’s one more process worth knowing about, which can increase the chances of your offer being accepted by the seller. It’s the conditional loan approval.

What is a conditional loan approval, you ask? Let’s delve in below.

Conditional loan approval is granted to you when you have gone through the initial application process successfully. That means you have submitted the necessary documentation, such as employment and income proof, bank statements, tax returns, debt obligations, and utility bills, and they have been reviewed and verified by the mortgage lender.

The lender, though, may still require additional documentations or conditions before they fully grant you the loan. So, a lender will issue you a conditional loan approval statement, which states that they’re willing to approve your mortgage loan application provided that you meet the further conditions they require.

What is the Difference Between Conditional Loan Approval and Pre-approval?

A pre-approval loan means that the lender has reviewed your financial documents and determined how much money they can loan to you and what the interest rate would be. At this stage, the loan officer has pulled your credit report and assessed your creditworthiness but hasn’t gone to the full approval process.

Pre-approval is a step before conditional approval. A conditional loan approval carries more weight because, in this process, an underwriter has reviewed your documents and gone deeper into the assessment of your financial capabilities to pay back a mortgage. An underwriter is someone who determines the level of risk that comes with granting you a mortgage loan.

Why is Conditional Loan Approval Important?

Conditional loan approval is almost an assurance that you can secure funding for the home you want to buy or construct. When you have a conditional loan approved, you have more edge over other buyers who only have a pre-approved loan. It makes your offer more attractive to the seller because you’re one step closer to getting formal loan approval, so you’re more likely to be chosen.

Likewise, a conditional loan approved can speed up the homebuying process. So, if you want to close the deal as fast as possible, it’s best to obtain a conditional loan approved.

How Do You Get a Conditional Loan Approval?

When applying for conditional mortgage approval, follow these steps:

  1. Shop around for the best mortgage deals in the market. Compare the top lenders and see which one offers the best home loan that suits your needs. Choose only the best one for you and avoid sending too many applications to different lenders because it can trigger hard inquiries that could affect your credit score.
  2. Know the requirements that the lender needs from you and submit everything.
  3. Let your lender know that you want a conditional loan approval letter if you’re eligible.
  4. Wait for the underwriter to review your documents.
  5. The lender will notify you of the results of your application.

In general, getting a conditional loan approval can take two days to one week. However, you’ll be able to get an estimate of how long it takes from the lender provider. It may vary depending on how complete your documentations are or if the lender needs more before they begin the underwriting process.

Here are the documents you need to submit to the lender:

  • Pay stubs (typically the recent three months)
  • Employment verification
  • Income verification
  • Tax returns
  • Bank statements
  • Asset statements
  • Debt obligations such as existing loans and credit cards
  • Utility bills

If you’re self-employed, you may need to provide more documents, such as business license, business income statement, and contracts as proof that you have ongoing projects and source of income.

Does Conditional Approval Mean Approved?

No, a conditional approval doesn’t mean your mortgage is already approved. It’s not a guarantee that you can get the loan you’re applying for. You still need to get to the final review and approval process after you meet the conditions set by the underwriter.

“Can I go ahead and put an offer down on a house?” Yes, you can. When you have conditional loan approval, you have a clear idea of how much home you can buy with that loan.

Remember, though, that your conditional loan approval may still get denied later on. You won’t be penalized, but the deal won’t push through since your loan wasn’t approved. You can talk to your realtor for recommendations and guidance on how to proceed or work with your lender if there’s any way to turn things around. Otherwise, you need to work on why your mortgage was rejected and start step 1 of the home buying process again.

What Happens After Your Loan is Conditionally Approved?

When your loan is conditionally approved, the lender will notify you and issue a conditional loan approval letter. You will also be informed about the additional requirements you need to provide for the final underwriting and closing.

You may need to provide the following requirements as applicable:

  • Complete appraisal of the home you plan to buy
  • Homeowner’s insurance policy
  • Mortgage insurance
  • Letter of explanation for a recent huge deposit or withdrawal
  • Self-employment documents
  • Bankruptcy filing
  • Divorce decree

What Can You Do to Ensure That the Conditional Approval is Not Changed or Denied Later?

Since the conditional loan approval is not guaranteed approval, there are times that the mortgage loan gets denied later. Why does that happen? Here are a few reasons:

  • Your financial situation changed (e.g., you lost a job or your credit score declined)
  • The loan program is no longer available by the time you’ve completed the conditions
  • You didn’t meet the conditions asked
  • You wanted a different home loan offer, so you’ll have to go back to step 1 of the loan process

How do you ensure, then, that your mortgage application will go through? Here are three tips:

  1. Make sure you meet all the conditions asked as soon as possible. Provide all the additional documents and verifications that the lender is requesting. Do it promptly to prevent the lender from closing your application when you didn’t submit the requirements on time.
  2. Protect your credit score. Pay your bills on time, don’t apply for new credit, and don’t increase your debt (credit card utilization) until your mortgage loan application has been approved.
  3. Don’t change anything. Make sure that you don’t change anything in your application or finances that may cause the underwriter to revoke the conditional approval. Don’t make huge withdrawals or unexplainable deposits and ensure there will be no bounced checks.

What are the Steps for the Mortgage Approval Process?

A mortgage application process involves several steps, which can take 2 to 6 weeks. Let’s take a look:

1. Pre-approval

Shop for the best mortgage lender with the most favorable home loan offer and submit your requirements. A loan officer will take a look at your documents to determine your financial capacity. At this stage, you’ll have an idea of how much the lender is willing to lend you and what will be the mortgage interest. The lender will give you a pre-approval letter stating such details.

2. Shop for a Home

Now that you know how much the lender will loan to you, you can shop for a home that’s within the budget. When you’ve found a home that you want to buy, you can make an offer and use your pre-approval letter to prove your eligibility. However, you may want to proceed to the next step of getting conditional loan approval to make you an even stronger buyer.

3. Underwriting or Conditional Approval

Based on your pre-approved loan, you can proceed to a full loan application with that lender or you can choose another one. Then, complete all the documents required and submit them for underwriting. In this step, the underwriter will dive deeper into your financial capacity to pay back the mortgage loan. When you qualified, the underwriter will sign-off your application for conditional loan approval. It means that the underwriter is pretty much satisfied with your application but still needs additional information before your loan is clear to close.

4. Home Appraisal

One of the conditions you need to satisfy when you get the conditional loan approval is a satisfactory home appraisal. The lender will hire a third-party appraiser to determine the estimated value of the home you want to buy and that you’ll be paying a fair price for it. The home needs to be appraised for the contracted purchase price for your loan to be approved.

5. Clear to Close

Once you’ve satisfied the conditions set for the conditional loan, your loan will be “clear to close.” That means that the underwriter has okayed your application but the lender may still conduct additional steps, such as pulling your credit report and verifying your employment to ensure that nothing has changed since you’ve submitted all your documents.

6. Closing

When the lender has determined that all is well with the requirements and your financial health, the final step is closing. It’s when you can finally sign the loan documents. On closing day, you need to sign several documents and pay for closing costs and down payment. You also need to bring a photo identification and bank-approved checks. When all the documents are completed, the funds will be released to the seller and you’ll receive your first payment statement.


Conditional loan approval is a better option than mortgage pre-approval, especially if you’re eyeing a home with a lot of offers from other buyers. A conditionally approved loan shows that you’re more eligible to buy the house because your loan application has already gone through underwriting. With that, your offer has more chances of being chosen by the seller. Getting conditionally approved doesn’t have to be too much work—just make sure that you submit all the necessary documents, satisfy the conditions set by the underwriter as quickly as you can, and change nothing while waiting for the results.