Approval: Loan Estimate, Rate Lock & Appraisal
by stazhkova on 15.10.2025
Hello. After your offer is accepted and the inspection is completed, the next important stage begins—obtaining final loan approval. At this step, the bank checks not only your ability to pay, but also the property itself to make sure it meets lending requirements. Today I will explain in detail how this process works and what actions you need to take.
Difference between preliminary and final approval
Preliminary loan approval is issued based on your credit history and income level. Final approval requires a deeper analysis: the bank requests additional documents about you and evaluates the property. This is necessary to confirm that the loan is secured by reliable collateral.
Good Faith Estimate (GFE)
After you submit the application, the bank is obliged within three business days to provide a Good Faith Estimate—a preliminary estimate of loan costs. The document includes:
• information about the lender, borrower, and property;
• the planned closing date;
• the interest rate, penalties, and additional charges;
• service fees—appraisal, insurance, document processing.
This document allows you to assess the full cost of the loan in advance and compare the terms with offers from other lenders.
Locking the interest rate
Interest rates change daily, so it is important to lock the rate for the period until closing. If you do not manage to close on time, it may be possible to extend the lock for an additional fee. This helps avoid an unexpected increase in the monthly payment.
Lowering the rate by paying “points”
The bank may offer to pay “points” (additional fees) to reduce the rate. This option is beneficial if you plan to own the property for a long time: the extra costs are offset by lower monthly payments.
Property appraisal
The bank orders an independent appraisal to confirm the property’s market value. Possible outcomes:
- The value matches or exceeds the purchase price—the transaction proceeds without changes.
- The value is below the purchase price—you must either increase the down payment, negotiate a price reduction with the seller, or terminate the contract if the terms allow it.
Property insurance
Before approving the loan, the bank requires an insurance policy on the property. If the property is in a risk area (for example, a flood zone), special insurance will be required. Even if it is not mandatory, obtaining an insurance policy is always a prudent decision to protect your asset.
Conclusion
Obtaining final loan approval is the last financial step before closing. After locking the rate, completing the appraisal, and arranging insurance, you will be fully ready to receive the keys. In the next material, we will cover the final stage—signing the documents and closing the transaction.
