Conditions are what we call the documents, tasks, and/or reports an underwriting team needs in order to certify a loan has met the requirements for final loan approval.
This is often where loans fall apart. Issues that may have been overlooked or ignored (e.g. insufficient income, undisclosed debts, etc) inevitably surface here. Each loan product has its own checklist of requirements that must be met for an UW to approve it. Some products, like private money or DSCR loans, allow for more flexibility on these checklists, while those with the lowest rates are outrageously strict. The strictness is by design; lower interest rates reflect reduced risk for the lender. When all conditions are met, the lender's risk decreases, enabling them to offer better rates.
Furthermore, if enough loans meet a set of standardized checkboxes, a market can be created to benefit both lenders AND borrowers.
A few conditions like appraisal & HOI are standard practice, but the point of using a catch-all term like “conditions” is because these needs are unique to a borrower’s file, circumstances, and property.
Once we’ve gathered what the bank has asked for, we’ll “resubmit” the loan to the underwriting team and I’ll hop on the phone with them. In some cases, the UWs will need more info or written clarification on what we submitted. This game can have several rounds of back and forth, but if any more than 2 rounds occur, we’re doing something wrong (and we probably know it).
Other Notes:
There can be conditions after final approval.