Bank mortgage approval refers to a financial institution's formal agreement to provide a borrower with a mortgage loan, subject to specific terms and conditions. This approval confirms the borrower's eligibility based on creditworthiness, income stability, property valuation, and adherence to lending criteria. Once approved, the borrower can proceed with the property purchase or refinance, with the bank committing to fund the transaction under agreed-upon parameters such as interest rates, loan amounts, and repayment schedules.

The significance of bank mortgage approval lies in its role as a critical step in homeownership or refinancing. Lenders evaluate multiple factors to minimize default risk. For instance, a borrower's credit score directly impacts approval chances; those with scores above 740 face lower denial rates, while scores below 620 often result in rejections or higher rates. According to the 2023 Mortgage Bankers Association report, approximately 72% of mortgage applications were approved, with conventional loans (requiring 20% down) approval rates at 65% compared to 85% for Federal Housing Administration (FHA) loans (requiring 3.5% down). Property appraisals also play a pivotal role—overvalued properties may lead to loan rejections or reduced approval amounts. Additionally, income-to-debt ratio thresholds (typically 43% or lower) are strictly enforced. These stringent criteria ensure lenders mitigate risks while supporting responsible lending practices, fostering a stable housing market.