What does a conditional commitment inform the lender?

A conditional commitment informs the lender that the loan may be closed, indicating that the lender has received preliminary approval for the loan, subject to certain conditions being met. This is a critical step in the loan process, as it assures the lender that the terms of the loan have been reviewed and that they will proceed to the closing phase provided that specific conditions—typically related to documentation and borrower qualifications—are satisfied.

This commitment also serves as an important signal to stakeholders that the borrower is in a position to finalize the loan agreement, assuming all stipulated requirements are addressed. It reflects the lender’s confidence in the borrower’s financial situation and the security being provided, as well as the overall readiness to complete the transaction, pending final approvals or document verification.

In contrast, the other options relate to negative or neutral outcomes; they do not reflect a pathway to closing the loan. A denial of the guarantee request or the unavailability of funding denotes obstacles to the loan process, while the cessation of borrower qualification indicates that the borrower is no longer eligible for the loan, rather than signaling readiness to close.