What is a conditional approval, and why is it not an approval?

What it actually says

Three things, whether or not the letter spells them out:

1. An underwriter is willing to proceed on the information provided.
2. A list of conditions must be satisfied first.
3. The decision assumes nothing material changes before funding — your finances, the collateral, the ownership, the disclosed positions.

That third assumption is the one people forget. A conditional approval is a snapshot of a moving file.

Why it is not a commitment

A commitment letter is a lender undertaking to lend on stated terms if defined conditions are met, and it is a document with weight. A conditional approval is generally a step before that, often expressly non-binding, and revocable. Even a commitment letter usually contains conditions precedent and a material adverse change clause.

The practical test: ask whether the document you received is binding on the funder, and what would allow them to withdraw. Ask in writing. The answer tells you what you are holding.

What conditions typically involve

Some you control — a document, a signature, an explanation of a deposit. Some the lender controls — a search, a valuation, a committee slot. And some belong to people with no interest in your timetable:

• The IRS, on transcripts
• Your insurer, on an endorsement rather than a certificate
• Your landlord, on a waiver
• An existing funder, on a payoff letter
• An appraiser or a field exam firm

Start the third group on the day of conditional approval. They are the reason approvals expire.

What can still change the outcome

• A new UCC filing appearing against your assets
• Another advance taken while the file is in process
• A month closing and a fresh bank statement showing something different
• An appraisal or field exam coming back below expectation
• A credit re-pull before funding
• The funder's own policy changing, or its capital provider's

None of this is unusual. It is why "approved" and "funded" are separated by a stage with its own name.

The timetable, which is what actually kills approvals

• A payoff letter from an existing funder: 5 days.
• An insurance endorsement: 7 days.
• IRS transcripts: 12 days.
• An appraisal, from order to report: 18 days.
• A landlord waiver: 21 days.

Started on the day of approval, everything lands by day 21 and the lender has nine days to close. Started on day nine — which is what happens when you wait to see whether the easy conditions clear first — the landlord waiver arrives on day 30, the approval has expired, and the file goes back for a re-decision against a fresh credit pull and another month of bank statements.

Nothing went wrong in that second version except sequencing. The items do not depend on one another, and treating them as a list to work through in order is the most common self-inflicted delay in the process.

How to tell a real conditional approval from a marketing email

An approval that came out of an underwriting process has particular features:

• A stated amount and structure, not "up to" a number.
• A named person or desk that issued it.
• A finite list of conditions, in writing.
• An expiry date.
• Pricing, including fees, expressed in dollars.

An email saying you are pre-approved, with a number, no conditions and a link, is a marketing communication. It may lead somewhere real, but it is not a decision about you and nothing about it should change what you do this week.

Between the two sits the offer that is genuine but conditional on something nobody mentioned: a site visit, a bank data connection, a second owner's signature, an interview. Asking "is this the complete list" is the question that surfaces those.

What to do on the day you receive one

Ask five questions in one message:

1. Is this the complete list of conditions to funding?
2. Which are conditions precedent, and which are post-closing?
3. When does this approval expire?
4. Will credit or bank data be re-pulled before funding, and would a change re-open the decision?
5. Is anything in this document binding on you?

Then start the third-party items immediately and clear the rest in one batch — the mechanics are in what a stip is and how to clear one.

When a condition cannot be met

Sometimes one genuinely cannot be. The landlord refuses to sign a waiver. The insurer will not add that endorsement on that policy form. A prior funder will not issue a payoff letter at a figure you accept.

Say so early rather than going quiet, because there is usually more than one route to the underlying concern. A landlord waiver exists to protect the lender's access to collateral on leased premises, and a lender may accept a shorter access period, a letter rather than a recorded waiver, or a different collateral package. An insurer that will not endorse may issue a separate policy. A payoff dispute can sometimes be handled by escrowing the difference.

What closes those doors is time. A condition raised in week one has alternatives. The same condition raised on day 28 has none.

What to refuse