One of the final steps of the loan process can also be one of the most nerve-wracking. Once a buyer and seller have mutually agreed upon the terms of the sale, and signed the Purchase and Sales Agreement, the loan goes to an underwriter for final approval. Here are the four possible final loan application outcomes from the underwriter.
Full Approval
Full approval is the best-case scenario and what everyone is striving for. This outcome is rare on the first try, but it can happen. Full approval means that the underwriter deems the buyer is wholly qualified for the loan amount and is trusted to pay it back, no questions or additional documentation is necessary. In this situation, the buyer is considered “Clear to Close.” Full approval generally also means the sale will wrap up without any lending hiccups.
Conditional Approval
Conditional approval is the most common outcome. If a loan is conditionally approved, the underwriter says we’ll have approval AS LONG AS these detailed conditions are met prior to closing. The underwriter will note the deadline for these requested documents: either prior to documents or prior to funding. It isn’t the end of the world to get this outcome, it just means all parties will need to be in tight communication, and the borrower will need to submit documents quickly to stay on time. Typically, issues only arise if a document can’t be found, or there are issues proving employment or income.
Suspended for More Documentation
If a loan is suspended for more documentation, it means the underwriter has suspended the file until they receive more information. A common reason an underwriter will give a suspended for more documentation outcome is the requirement of additional proof of income. With irregular or special pay, it can be tricky to provide all the correct documentation on the first try. All hope is not lost with this outcome, but it can make for a longer timeline before closing.
Loan Denied
Loans receive a denial outcome if the underwriter doesn’t feel the borrower is a good credit risk and are unfit to receive funding. If the borrower is upfront with their finance situation to their loan officer from the beginning, a loan denial isn’t usually the outcome as the loan officer will help the borrower before it gets to underwriting. A loan denial is disappointing for both the buyer and the seller. Sellers will need to find another buyer, and the buyer will have to figure out how to improve their finances.
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HomeTown Lenders NW has loan officers who are experienced and educated about loan programs and the home buying process. We know buying a home can be complicated, and it’s our privilege to help buyers have the smoothest home buying journey from start to finish. Fill out our contact form today to get started!