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Conditional Approval

Understand what conditional approval means in Canadian real estate, how it differs from pre-approval, and why it's key in securing a mortgage.

Conditional Approval

Conditional Approval

May 22, 2025


What is Conditional Approval?

Conditional approval is a preliminary approval given by a mortgage lender, indicating that a borrower qualifies for a mortgage based on specific conditions that must be met before full approval is granted.

Why Conditional Approval Matters in Real Estate

In Canadian real estate, conditional approval is a critical step in the home financing process. It shows that a lender is willing to offer a mortgage, provided the borrower satisfies certain requirements. These conditions can include:

  • Verifying income and employment
  • Providing property details or appraisal
  • Meeting debt service ratio guidelines
  • Confirming down payment sources

Unlike pre-approval, which is often based on self-reported information, conditional approval involves a deeper review of financial documents and creditworthiness. It gives buyers more confidence when making an offer but does not guarantee funding until all conditions are met. Conditional approval strengthens a buyer’s offer and may speed up the final mortgage process. However, failing to meet the conditions can lead to delays or a mortgage being declined, so it’s essential to understand and fulfill the lender’s requirements promptly.

Example of Conditional Approval

A buyer receives conditional approval for a $600,000 mortgage, pending verification of their income and submission of a satisfactory property appraisal.

Key Takeaways

  • Indicates a lender is willing to fund a mortgage pending conditions.
  • Requires financial verification and documentation.
  • More rigorous than pre-approval.
  • Helps buyers make competitive offers.
  • Final approval only granted once all conditions are met.

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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