Every loan has them. Every loan. Even loans made to the most pristine borrowers; loan conditions. Some loans have more than others, many more in fact, but conditions are an inescapable fact of home lending today. But what exactly are loan conditions and why do lenders even mess with them in the first place?
A loan condition is a qualifier. For example, a lender can print out an approval letter stating that your loan is approved on the condition that you bring in your most recent paycheck stub to the closing table. Or the condition can be a bit more westernbranchchiropractor onerous and say that your loan is approved if you can find another $1,000 of income. If you don’t have an additional $1,000 then it’s no longer a condition; it’s a loan denial.
A lender will have different degrees of conditions. A loan can be an underwriting condition meaning the underwriter will not approve the mortgage loan unless something is provided or performed. For example, an underwriter could add a loan condition requiring that another appraisal be performed in addition to the one in the loan file. Or an underwriter will require that proof of having paid an outstanding collection account is verified.
Conditions can also arise as the borrower provides loan documentation. For instance, an underwriting condition could be providing bank statements. The borrower provides them and the underwriter sees there are questionable deposits on the bank account and issue a new condition wanting an explanation about the odd deposits. In this common occurrence, a condition resulted in still another condition.
The second, less severe condition is one that can be reasonably obtained at the closing table and is not a critical piece of loan approval yet more of a housekeeping issue. For instance, a closing condition could be providing a valid driver’s license or other photo ID to the closer. That’s an easy one.
Conditions, while bothersome, actually help streamline the approval process by clearly highlighting what still needs to be done before the loan can be approved. By having a completed loan application at the very beginning and working closely with your loan officer, you can help to reduce the number of conditions on your loan.
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