An underwriting approval that depends on specific outstanding conditions being satisfied before closing. Common conditions: updated docs, explanations, final pay stub, etc.
Conditional approval (sometimes called "approved with conditions") is the most common underwriting outcome on a healthy loan. It means the underwriter is satisfied with your file overall and will approve the loan once a specific list of remaining items is provided.
Common conditions: updated bank statement before closing, letter explaining a deposit or address gap, current pay stub, proof of paid-off debt, homeowners insurance binder, final inspection report. The conditions are usually predictable and quick to satisfy.
Once you fulfill all conditions, the underwriter issues the final approval (sometimes called "clear to close" or CTC). At that point, the lender prepares closing documents and you're ready to close.
Example
Three weeks before closing, your underwriter approves your loan with 4 conditions: (1) updated pay stub, (2) explanation for a $5K deposit, (3) homeowners insurance policy, (4) appraisal review sign-off. Your processor collects them over the next week. Conditions cleared, CTC issued, closing happens on schedule.
Also known as
conditional underwriting approval, conditional commitment, approved with conditions