When a lender approves your mortgage, the approval may be with or without conditions. When an approval is without conditions, you can purchase your home without meeting any other requirements. An approval with conditions, on the other hand, indicates that you must either provide the lender with more documentation or complete certain tasks before you can close on the loan.
In many cases, a lender will approve a loan with the condition that you must provide him with additional documentation to prove the claims you made on your application. For example, the lender may request copies of your tax returns, W-2, pay stubs or evidence of continuing employment before he will formally approve the loan. Lenders may also require copies of the purchase agreement, or they may ask for proof of the assets you need to close.
If you don't yet meet the lender's requirements for approval but you will before closing, you may receive an approval with financial conditions. For example, you may need to close some of your credit accounts, resolve a delinquency or have an error removed from your credit report. If you can't afford to carry two mortgages, you may also need to close on the sale of a home you already own.
Many lenders require an appraisal on the home you plan to purchase before they will provide you with a firm approval. If the home doesn't appraise for at least the amount you have agreed to pay, the lender may not grant you the loan. Some lenders may also require an inspection of the home to ensure that it is structurally sound and free from serious defects, such as mold or pests.
Even if the lender approves your loan, most lenders will require a clean title and a copy of your homeowner's insurance policy before they will release the funds for your loan. Some lenders may also require you to establish an escrow account and make an initial deposit. If you can't meet all of the lenders conditions before closing, you may need to delay your closing date, or the lender may deny your loan altogether.
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