The Three Stages of Mortgage Approval
Many buyers confuse these stages. Understanding where you are—and what each stage actually means—helps set realistic expectations.
Pre-Approval
The lender has reviewed your initial documents and credit, and determined you likely qualify for a loan up to a certain amount. This is a conditional green light based on a preliminary review.
Conditional Approval
After you go under contract, the underwriter does a deep dive into your file. They approve your loan with conditions—specific requirements that must be met before final approval.
Clear to Close
All conditions have been satisfied. The underwriter has given final approval. The lender is ready to fund your loan and you can schedule closing. This is the real finish line.
Pre-approval is not a guarantee. It's a prediction. Conditional approval is progress, but you're not done. Only "Clear to Close" (CTC) means your loan is truly approved.
What Underwriters Actually Do
The underwriter is the person who decides whether to approve your loan. They're not trying to deny you—they're trying to verify that you meet all the requirements and that the loan is a good risk for the lender.
The Underwriting Review
Income Verification
Confirming your income matches what you stated and is stable
Employment Verification
Calling your employer to confirm you still work there
Credit Re-Check
Pulling your credit again to check for changes
Asset Verification
Confirming you have funds for down payment and closing
Debt Ratio Calculation
Final DTI calculation with exact loan amount and property taxes
Property Review
Reviewing appraisal, title, and property conditions
The underwriter is looking at your entire financial picture—not just the numbers, but the story they tell. Consistency is key. Surprises are red flags.
DANGER ZONE: What NOT to Do During Underwriting
This section could save your loan. From the moment you go under contract until the day you close, follow these rules religiously:
🚫 Don't Change Jobs
Even a "better" job can derail your loan. Underwriters want to see stability. If you must change jobs, talk to your lender FIRST—never surprise them.
🚫 Don't Open New Credit
No new credit cards, car loans, or financing of any kind. Each inquiry can drop your score, and new debt changes your ratios. That furniture store offer can wait.
🚫 Don't Make Large Purchases
Even paying cash for big items raises questions. Where did that $10,000 go? Why are your bank balances different? Keep spending normal and minimal.
🚫 Don't Move Money Around
Large transfers between accounts, big cash deposits, or unusual activity creates "paper trail" problems. The underwriter needs to source all your funds.
🚫 Don't Co-Sign Anything
Co-signing a loan for someone else adds that entire debt to YOUR debt-to-income ratio. This can instantly disqualify you.
🚫 Don't Close Credit Accounts
Closing old credit cards can hurt your credit score by changing your credit utilization ratio and average account age. Leave everything as-is.
The golden rule: From contract to closing, your financial life should be BORING. No changes, no surprises.
Understanding Loan Conditions
After the underwriter reviews your file, they'll issue a conditional approval with a list of items that must be provided before final approval. Here are the common types:
Prior to Documents (PTD)
Items needed before your final loan documents can be prepared. These are the most urgent and typically include:
- Updated pay stubs (within 30 days of closing)
- Updated bank statements (most recent month)
- Explanation letters for any credit inquiries
- Verification of Employment (VOE) completion
- Gift letter and documentation (if using gift funds)
Prior to Funding (PTF)
Items that must be satisfied before the lender releases funds. These often include:
- Clear title commitment
- Proof of homeowner's insurance
- Final Closing Disclosure signed
- All outstanding conditions cleared
Clear to Close Requirements
Once all PTD and PTF conditions are satisfied, you receive Clear to Close. At this point:
- Closing documents are prepared
- Final numbers are confirmed
- Closing date and time can be scheduled
- Wire instructions are provided
Respond to condition requests IMMEDIATELY. Every day you delay pushes back your closing. Have your documents organized and ready to go.
Track Your Final Approval Progress
Use this interactive tracker to monitor where you are in the final approval process:
Loan application updated with property details
Full application submitted with contract and property information
Appraisal ordered and scheduled
Lender has ordered the appraisal; date scheduled
Appraisal completed and reviewed
Appraisal came back at or above purchase price
Conditional approval received
Underwriter has reviewed file and issued conditions
All conditions submitted
You've provided all requested documents and information
Clear to Close received
Final approval granted—loan is ready to fund
Closing Disclosure received
Final numbers confirmed; required 3-day waiting period started
Closing scheduled
Date, time, and location confirmed with title company
0 of 8 steps completed
Last-Minute Deal Killers (And How to Avoid Them)
These are real scenarios that can kill your loan at the last minute:
Job Loss or Change
Your lender verifies employment right before closing. If you've changed jobs or lost your job, the loan is immediately on hold.
Prevention: Don't quit or change jobs until after closing.
Credit Score Drop
New credit, late payments, or increased balances can drop your score below the threshold needed for your loan program.
Prevention: Don't use credit, set all bills to autopay.
Large Cash Deposit
Depositing more than 50% of your monthly income in cash requires explanation and documentation of the source.
Prevention: Avoid cash deposits entirely.
Insurance Issues
Can't get homeowner's insurance (due to roof age, claims history, etc.) or insurance is significantly more expensive than estimated.
Prevention: Get insurance quotes early in the process.
Final Walkthrough Problems
Discovery of new damage, agreed repairs not completed, or items missing from the home.
Prevention: Do your final walkthrough carefully.
Wire Fraud
Scammers hack email to send fake wire instructions. You send closing funds to the wrong account.
Prevention: ALWAYS verify wire instructions by phone.
Your lender may do a final credit check the day before closing. Large purchases or new credit between CTC and closing can still derail your loan. Keep following the rules until you have keys in hand.