What Is Conditional Loan Approval?

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Conditional loan approval is documentation from a lender stating that your mortgage application will be approved after meeting specific circumstances. It is a step in underwriting, usually between preapproval and being cleared to close.

Key Takeaways

  • Conditional loan approval is a statement from a lender that a mortgage will be approved after meeting a set of conditions.
  • The conditional approval doesn't guarantee a mortgage.
  • You will need to meet the conditions set by the underwriter and have them reviewed before you can close.

How Conditional Loan Approval Works

As a homebuyer, you're probably familiar with getting preapproved for a mortgage before diving 

into the house-buying hunt. Yet there's an even better position to be in as a borrower when you enter the real estate market, and that's conditional approval.

A conditional loan approval functions similarly to a preapproval on a home mortgage; however, it's even better for the borrower. An underwriter reviews all mortgage documentation before sending an applicant a conditional loan approval. This carries far more weight, showing that the borrower is farther along in the mortgage approval process.

You will receive conditional approval through a written statement from the mortgage lender. It states that the lender is currently satisfied with your application and will approve the mortgage if you meet specific requirements. These could include:

  • Verifying employment
  • Supplying more bank statements
  • Submitting a gift letter
  • Explaining recent, large withdrawals from your bank
  • Getting a home appraisal

It's important to understand that receiving conditional loan approval does not mean you're guaranteed a loan. Instead, it states that you will receive the mortgage if you supply required items and if those items receive the underwriter’s approval—emphasis on the “if.” It's essential not to have anything significant change in your financial situation during this process, as that could lead to a denial.

Obtaining conditional approval puts you in a great place as an interested buyer. It shows that you've done your diligence to submit financial documentation, and it gives the seller confidence that you're a good candidate. Conditional loan approvals also help speed up the closing process; you're already deep into mortgage approval by the time you are in sales conversations.


New construction often deems conditional approvals necessary to move forward. A contractor wants the lender's confirmation that you will be approved upon meeting specific circumstances. This provides more confidence that the construction will progress, which is essential for a contractor when accepting a job.

Example of Conditional Loan Approval

Any real estate agent will tell you to shop around for a mortgage before you search for a house, and that is a critical first step. You need to know how much you could be approved for to set a realistic homebuying budget and guide your search. The various levels of mortgage approval you will face during the process are:

  • Prequalification: The buyer provides estimated numbers and is identified as someone who may qualify.
  • Preapproval: The buyer's credit score and credit history are verified.
  • Conditional approval: The underwriter reviews documentation and deems that you are likely a good fit but needs more information to confirm that.
  • Mortgage approval: The underwriter has verified all details, and the mortgage is ready to be approved.
  • Approval to close: The lender provides the approval for the mortgage and timeline to close.

Once you've identified a lender you'd like to move forward with, you should provide as much documentation as possible. The name of the game at this phase is going above and beyond with what you can supply to answer all questions. You also can tell the lender you would like a conditional loan approval, once you've arrived at that step.


The underwriter's main job is to assess your ability to repay a loan. Be prepared by gathering the most common items at the start of your application. These include W-2s, bank statements, income tax returns, verification of employment, and letters explaining any large transactions in your bank account.

Now comes the hard part: waiting for the underwriter to review your application and see whether you're conditionally approved. If so, you will receive a statement with conditional approval, which you then can use in conversation with home sellers.

At the same time, you should move forward to check all the boxes contributing to your conditional loan approval that you can. Submit details you have on hand or can get quickly, such as income verification or letters from outside parties. Stay in constant contact with your lender and inform them of timelines on things such as home appraisals, which could take longer to gather.

A conditional loan approval puts you in a better buying position and doesn't take additional time or energy. You will have to submit documents and meet the underwriter's conditions at some point in the mortgage process. Start early and enter as a more confident homebuyer.

Frequently Asked Questions (FAQs)

Can a loan be denied after conditional approval?

A loan can be denied after conditional approval for several reasons, so you shouldn't take this step as a guarantee. For example, you may not have met the deadline to submit additional documents. The underwriter may be unable to verify your information based on your submission. You may have taken on debt, or something has come out about the house you’re targeting, such as a current lien.

How long after conditional approval is final approval?

The time between conditional approval and final approval could be anywhere from a few days to a few weeks. There is no set timeline, but you can support a quicker process by communicating clearly with the lender and supplying needed items ASAP.

What's the difference between preapproval and conditional approval?

Preapproval is when the lender verifies your credit score and history without the underwriter's involvement. With conditional approval, the underwriter has reviewed current documents and deems you a good candidate, once specific requirements are met. Conditional approval carries more legitimacy, as the one who will approve or deny your application is satisfied so far.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Chase. “How To Prequalify for a Mortgage.”

  2. RBFCU. “What To Expect During the Construction Loan Process.”

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