Approval
Definition and meaning of Approval in real estate.
Approval is a lender's formal commitment to provide a specific mortgage amount to a borrower based on a verification of their financial profile.
In more detail
Mortgage approval occurs after a comprehensive underwriting process where the lender verifies the borrower's income, employment, credit score, assets, and liabilities. This differs from pre-approval, which is a preliminary review, and pre-qualification, which is a basic estimate. Full approval is contingent on a satisfactory appraisal and clean title report for the specific property being purchased.
Once these conditions are met, the lender issues a clear-to-close letter, signaling that the transaction can proceed to settlement.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Stages | Pre-qualification, pre-approval, conditional approval, and final approval |
| Key requirement | Satisfactory underwriting, appraisal, and title search |
| Output | Written commitment letter or clear-to-close notification |
After reviewing the property appraisal and verifying the borrower's tax returns, the lender issued a formal mortgage approval so the buyer could close on their new home.
Frequently asked questions
Can a mortgage approval be revoked before closing?
Yes, lenders can revoke approval if a borrower's financial situation changes, such as taking on new debt, losing a job, or experiencing a credit score drop.
What is a conditional approval?
A conditional approval means the lender will fund the loan once specific requirements are met, such as providing extra tax documents or explaining a large bank deposit.
How long does final mortgage approval take?
Once all documentation is submitted, the underwriting review for final approval typically takes a few days to a week.