How Does A Loan Approval Work?

In these tough economic times, getting a home loan approved can be a difficult process. When a family needs to borrow money for any purpose, the first thing that comes to mind is getting the approval done quickly. This is why there are so many lenders in today’s world competing for your business. Each lender has its own set of requirements, which they are looking for to approve a loan. If you’re looking to get a loan approved, but have very little information available on what the lenders are looking for, then this article is right for you.

 

lender and bank require a different set of documents

The very first thing you should do before attempting to get a loan approved is to make sure you fully understand what the requirements are from the lender and the bank you plan to use. Each lender and bank require a different set of documents when they are working with someone to obtain a loan. When you apply to a bank or credit union, the first thing they are going to ask you for is your most recent pay stubs. They also require you to show them copies of some personal bills you have paid in the past three months. You should also keep track of all your current debts as well. This information is going to be required for both the lender and the bank to decide if you are a good risk to lend to, and if so, what the terms of the loan will be.

Some lenders are looking more into your credit history and employment history

These types of loans are called “conditionally approved” loans. A lender may temporarily approve your loan request until they receive further documentation regarding your income and financial situation. During the time that your conditionally approved loan is active, you still have to meet all of the other required loan conditions. Once the bank determines that your income and the financial situation warrants approval, they will formally accept your application for a loan.

 

conditionally approved” loan

“Conditionally approved” does not mean that you have been approved. It simply means that your bank has decided to hold on to your loan request. Your loan provider will work with you to make sure that you fully understand their policies regarding the status of your loan request.

 

The next step is the “underwriting process”

This is where your application may be reviewed by a third-party agency outside of the bank. In this review process, you will likely be asked to provide additional documentation regarding the other information the bank requires from you. You may also be asked to provide proof of income and assets. The third-party underwriter will make their decision about approving or denying your loan request based on the information that is reviewed. The third-party underwriter may ask you to provide credit scores or other documents to prove your ability to repay the loan.

 

the “pre-approval”

The final step in the underwriting process is the “pre-approval”. At this point, the lender will officially approve your loan request. The pre-approval will only last for up to three business days, during which time the lender will notify you of any negative information that is discovered during the underwriting process. If during this period of time you do not repay the loan as agreed, then the underwriting process will end and your credit history will reflect a denied loan request.

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