What a conditional approval is
Once the underwriter reviews your file, you'll get a conditional approval: the loan is approved as long as specific items are provided or verified. Some conditions must be cleared before closing documents are drawn. Others can be cleared at or just before funding.
The most common conditions, and why
Updated pay stubs and bank statements. Documents typically expire after 30 to 60 days, so longer closings mean fresh copies.** Sourcing large deposits.** Lenders must document where money came from, to rule out undisclosed loans. A paycheck is easy. Cash deposits, transfers between accounts and money from friends need a paper trail.** Letters of explanation.** A late payment, a credit inquiry, a gap in work or an address change usually needs a short written explanation.** Gift documentation.** A signed gift letter plus proof of the transfer from the giver's account to yours.** Verification of employment.** Your employer is contacted, and often again within days of closing.** Insurance and title items.** Proof of homeowners insurance, and in Florida often a four point or wind mitigation inspection on older homes.** Appraisal items.** Repairs, a second look at comparable sales, or proof that work was completed.
What not to do before closing
Don't open new credit, finance furniture or co sign for anyone. New debt can change your ratio and trigger a new review.** Don't change jobs** without talking to your lender first, even for a raise.** Don't move money around** or make large cash deposits you can't document.** Don't miss payments** on anything. A single late payment can affect an approval.** Don't close credit cards** without asking. It can lower your score.
How to clear conditions faster
Send exactly what's asked for, complete and legible, all pages including blank ones. Answer the question behind the condition, not just the literal request. Respond the same day when you can. And ask your loan officer what each condition is for, so you can get it right the first time.
Clear to close and the final days
Once every condition is cleared, the lender issues the clear to close. Your Closing Disclosure must reach you at least three business days before closing. Compare it to your Loan Estimate and ask about anything that changed. Just before closing, expect a final credit check and employment verification, which is why the last few weeks matter as much as the first.
The deposit that held up a closing
Two weeks before closing, Kevin deposited $3,500 in cash from selling a motorcycle. The underwriter asked where it came from.
He had the bill of sale and the title transfer, so it was cleared in a day. Without that paper trail, the money couldn't have been used for closing, and the closing would have been delayed.
Frequently asked questions
Why does the underwriter keep asking for more documents?
Each condition verifies something the approval depends on. New conditions can also appear when a document raises a new question.
How long does it take to clear conditions?
Often a few days, depending on how quickly documents come in and how busy the underwriter is.
Can I use a credit card before closing?
Normal use is fine. Avoid big purchases or carrying higher balances that could change your debt ratio.
What happens if something changes before closing?
Tell your loan officer right away. Most changes can be handled if they're caught early.