Approval means that the borrower has met the lender's qualification and underwriting requirements. In some cases the approval may be conditional on further verification of information provided by the borrower. This is becoming more common due to automated underwriting systems.

Approval is granted by either the broker or the bank originating the loan.

Bankapedia's Take:

Beware of an over zealous lender granting you an approval just to keep your business. Loan Officers are keenly aware that if they can't grant you an approval that you are likely to go to another lender. Understand that if one lender can't do it than just about all lenders can't do your loan. The reason for this is ultimately all loans follow the same basic guidelines and end up being sold off to the same banks or REITS.

Real Estate Agents can often pressure a loan officer into granting an approval so they can get the home they are selling or buying into escrow. An approval is not a guarantee and if the lender ultimately can't get your loan closed you are on the line for the earnest money deposit. As a safety an approval should contain some "get out of jail" clauses. For example if the house does not appraise for the sales price-this approval is "null and void". Should your credit drop between the day of the approval and before your funding date- this approval is "null and void". Should your employment be terminated....... you get the idea.

Just make sure that if 3 lenders tell you that they can't finance you and one bangs out an approval in 20 minutes, buyer beware. It's your money at risk not the Loan Officers.