Buying your first home is an exciting endeavor, but there are a plethora of steps required. For most people, this home-buying journey starts with the mortgage approval process. However, when applying for a home loan, you may find yourself “approved with conditions” and wondering what that means for you.

Houston’s trusted mortgage broker, Champions Mortgage, explains mortgage conditional approval below, as well as what it may change about your home purchase.

What Is Conditional Approval When It Comes to Home Mortgages? A Trial Period

Have you been approved with conditions for your mortgage? This indicates an interim period in which your mortgage lender will need to acquire some information. After that, you will be fully approved to receive the mortgage proceeds.

If you’ve just applied for your first-ever mortgage and received a notification that you’re approved with conditions, don’t panic. Conditional approval means the lender needs more details about you and will likely ask for the following information:

• Employment verification: W-2s and paystubs confirming your employment
• Tax returns: At least two years of tax returns
• Bank statements: Any documentation supporting unusual activity on your bank account (large withdrawals, recurring large deposits, etc.)
• Clean title: A report confirming the property’s value and other characteristics meet your lender’s stipulations
• Gift letters: Letters supporting any gifted funds from friends or family confirming there’s no expectation of repayment
• Home appraisals: Home appraisal detailing the property’s current condition and a review of the surrounding area for assessing the fair market value
• Good-faith money: Also called “earnest money,” this is a copy of any payments made in addition to your down payment.
• Proof of homeowners insurance: Documentation confirming current homeowners insurance or a copy of the actual policy

While it may seem like a lot, all of this is necessary for your final approval. Legally and from a business perspective, your lender must see that you’re financially responsible and able to pay back the loan they’re offering you. They also need proof that your home is a sound investment without any major concerns.

What Happens If You Can’t Provide All of This Information For Your Mortgage Provider? Conditions Stand

If this seems like a daunting number of documents, know that many people struggle to obtain all of the necessary paperwork for mortgage conditional approval. That’s why you should start preparing long in advance if you’re hoping to go through this process.

Failing to provide all of the required paperwork can result in the lender denying your mortgage application. For example, your chosen mortgage lender may deny your conditional loan approval for any of the following reasons:

• You’ve acquired new debt
• Your financial documents weren’t verified during the underwriting process
• You didn’t meet the loan requirements by the deadline
• The home appraisal is too low
• There’s a home lien
• Your home inspection revealed issues with the property
• You’ve had a recent loss of income

In-depth preparation is the best way to avoid a conditional approval denial. Have all of your financial documentation ready in advance and schedule any required inspections or appraisals. Doing as much research into your home of choice as possible also reduces the risk of unexpected property issues or repair needs coming up during the inspection process.

How Long Does Closing Take After a Mortgage with Conditional Approval? When Approval Happens

When homebuyers see that conditional approval letter, they often fear it’ll be ages before they get to move into the new home. However, this isn’t always the case. The faster you resolve any documentation issues, the sooner things will move forward.

In most cases, the conditional approval process takes about one to two weeks, with the closing immediately after that. 

Pre-Approval vs. Conditional Approval

Conditional approval is sometimes confused with pre-approval, but the two are very different things. Pre-approval is a process in which your lender verifies your credit score and gives you an estimate of what your budgeted mortgage amount would be. It’s just a preliminary step in the process, so, in most cases, there’s no review of any further information by an underwriter. 

With pre-approval, your lender simply uses your credit score to determine what you can afford. Still, many people seek pre-approval in the earliest stages of buying a house to give them a better idea of their budget. It might help you stay within an achievable price range when browsing potential homes. 

Mortgage conditional approval only happens after you’ve chosen a house and applied for a mortgage.

Should You Get Pre-Approved?

Is pre-approval worth it when you’re looking to buy a home? While it’s not a necessary step in the process, it’s certainly a good idea for budgeting. If not, you may find that you’re not qualified to go through the mortgage approval process because your financial information shows you can’t afford that home. 

Pre-approval solves this dilemma by making things clear from the beginning. That way, you can choose a home within your price range and prevent a lot of wasted time. Other benefits of pre-approval include the following:

• Pre-approval sets you apart from other buyers bidding on the same home.
• Builders require pre-approval before starting any new construction on a home.
• Pre-approval often speeds up the closing process to get you into your home quicker.

The pre-approval process can also help you avoid mortgage conditional approval because you already know you can afford the property and have the required documentation on hand.

Are You Interested in a Home in Houston? Champions Mortgage Can Help

If you’re looking to buy a home in the Houston area, why not consider Champions Mortgage? These real estate professionals make the buying process easy, especially for first-time homeowners. Everyone should have the home of their dreams, and no step in the journey should stop that from happening, not even mortgage conditional approval. 

Buying a home doesn’t have to be complicated! Champions Mortgage guides you through Texas home equity loans and pre-approval with ease. Find out more about buying a Houston property with Champions Mortgage at 281-727-2500 today.