Clear to Close Tips

First-time home buyer? Among the key checkpoints you’ll encounter, there’s one that stands tall. Clear to close.

In this blog post, we’ll explore everything about clear to close. We’ll cover all the crucial aspects of the clear to close process. We’ll discuss your responsibility as the buyer. We’ll also shed light on the lender’s role.

Curious about the timeline? We’ll quench your thirst for knowledge by addressing the burning question: How long does it take to reach clear to close?

Once you receive that long-awaited clear to close, your journey is not quite complete. We’ll guide you through the final steps to get to closing. From reviewing the closing documents to preparing for the grand finale.

We’ll also confront the lingering question that may flicker in the back of your mind: Can a loan be denied even after securing clear to close?

By the end of this blog post, you will be empowered to navigate the clear to close stage.

Take a deep breath, my fellow homebuyer, and let the anticipation build.

What Does Clear to Close Mean?

Clear to close is the final step in the mortgage approval process. When a buyer receives the “clear to close” status, it means that:

1. All contingencies have been met.
2. The mortgage underwriter has reviewed & approved all necessary documentation.
3. The lender has thoroughly assessed the buyer’s financial situation
4. The lender has determined that the borrower meets all the requirements for obtaining the mortgage.
5. The lender is prepared to release the funds for the purchase.

Reaching the clear to close stage is a critical moment for both the buyer and seller, as it signifies that the transaction is nearing its completion.

Importance of Clear to Close

Are you a first-time home buyer? Then chances are that you’re unfamiliar with the concept of clear to close. Buying a house can be stressful. There are so many things you could be worried about as a first-time home buyer.

Will I be able to secure a mortgage?

Can I get a mortgage with my credit score?

How much down payment do I need?

What if the property appraisal comes in lower than the agreed-upon purchase price?

So many questions. So much stress.

You’ll be glad to know that receiving the clear to close can bring you a sense of relief. If you’re a first-time home buyer, you’ll almost shed sweet tears of joy. Believe me. I would know. I was once a first-time home buyer. I remember when I got my clear to close like it was yesterday. The memory is fresh in my mind.

When I got my clear to close, I almost shed tears. I feel teary-eyed just thinking back on it.

Look, buying a house is a big deal. It was more of a big deal for me because I was buying this house solo. I wasn’t buying with a spouse. I wasn’t buying my first house with a friend. I was buying my first-house solo.

And boy did it feel good to receive the clear to close from my lender. I called all my friends. I grinned from ear to ear. I laughed. I jumped. I whooped. I celebrated.

Why? Because it meant that I was on track to complete the purchase. I was very close to finally being a homeowner.

Receiving the clear to close from your lender will give you the same peace of mind. This is most likely the one time, in the entire home-buying process, that you’ll be less stressed. Less anxious.

Writing the previous sentences really got me in my feelings. Got me in my feelings that I have decided to write a letter to you. You who have received the clear to close. Congratulations, my fellow first-time home buyer!

Requirements for Reaching Clear to Close

To my readers who are in the home-buying process but haven’t reached the clear to close stage, fret not. I gotchu.

I want you to know that I believe in you. You’re here today, reading this blog, because you’re determined. I see your determination. I see your dedication. And I have no doubt that you will reach the clear to close stage. Remember, everyone’s home buying journey is unique. It may take some time to navigate all the necessary steps. But with the right resources, with Mortgage Ministers by your side, you will get there.

While waiting to get the clear the close, you want to make sure you play your part.

The Buyer’s Part in Clear to Close

1. Provide Required Documentation: Submit all documents required by your lender. Submit them in a timely manner. These documents will help the lender verify your eligibility for the loan. Be prepared to provide:
   • Bank statements.
   • Tax returns.
   • Pay stubs.
   • Proof of assets.
   • Proof of employment.
2. Address Outstanding Conditions: Address any outstanding conditions or contingencies specified by the lender. This may involve providing:
   • Additional documentation.
   • Explanations for certain financial transactions.
   • Proof of homeowner’s insurance.
   • Resolution of any outstanding issues identified during the underwriting process.
3. Secure Homeowner’s Insurance: It is your responsibility to secure homeowner’s insurance coverage. Once secured, provide proof of insurance to your lender. Coordinate with an insurance agent to obtain the necessary coverage and ensure compliance with the lender’s requirements.
4. Maintain Financial Stability: Avoid making major purchases, taking on new debts, or making significant financial changes. Financial changes, if significant, could impact your credit profile or debt-to-income ratio. Lenders may perform a final credit check before issuing the clear to close.
5. Attend Home Inspections: If you have decided to get a home inspection, make sure you attend the inspection. Attending will help you identify any issues. Should issues arise, your lender might require the resolution of those issues to get the clear the clear to close.
6. Address Appraisal Issues: Appraisal issues? Work with your real estate agent, lender, and possibly the seller to address and resolve those issues.
7. Review Closing Disclosure: Carefully review the Closing Disclosure. Make sure it aligns with your expectation. The closing disclosure should outline:
   • The final loan terms.
   • Closing costs.
   • Any adjustments.
8. Coordinate with your Closing Agent: Maintain communication with your closing agent. Your closing agent is the person responsible for facilitating the closing process. They can provide guidance on any additional tasks or information needed for the clear to close. Your closing agent can be your attorney or a title company
9. Complete Final Walk-Through: Conduct a final walk-through of the property before closing. You’re checking to see that the property is in the expected condition. The seller has moved out. There are no missing fixtures or appliances. All requested repairs have been resolved. No plumbing issues. No HVAC issues. No safety hazards.
10. Fulfill Conditions: Fulfill any outstanding conditions specified by your lender. This may include resolving any remaining contingencies or addressing any last-minute requirements.
11. Ensure you have enough money to cover the closing cost.

Lender’s Part in Clear to Close.

Your lender also has a part to play before they can issue you a clear to close. Specific processes may vary between lenders. Here are some common tasks that lenders undertake before issuing the clear to close.

1. Underwriting Review: The lender’s underwriting team reviews the borrower’s complete loan file, which includes the application, credit report, income and employment verification, asset statements, property appraisal, and any other relevant documentation. They assess the borrower’s financial situation, creditworthiness, and the property’s value and condition.
2. Documentation Verification: The lender verifies the accuracy and authenticity of the borrower’s documentation, such as income and asset statements. They may contact employers, banks, or other financial institutions to validate the information provided.
3. Credit Analysis: The lender assesses the borrower’s credit history, reviewing credit scores, payment history, outstanding debts, and any derogatory marks. They determine if the borrower meets the lender’s minimum credit requirements for loan approval.
4. Debt-to-Income Ratio Calculation: The lender calculates the borrower’s debt-to-income ratio (DTI) to assess their ability to repay the loan. This involves comparing the borrower’s monthly debts (including the proposed mortgage payment) to their monthly income. The lender typically has maximum DTI limits that borrowers must meet to qualify for the loan.
5. Property Appraisal Evaluation: The lender reviews the property appraisal report to ensure the property’s value supports the loan amount requested. They verify that the appraisal is accurate, meets their standards, and aligns with the loan-to-value ratio requirements.
6. Title Examination: The lender performs a title examination to check for any liens, encumbrances, or title issues that could affect the property’s ownership. They verify that the title is clear and insurable, ensuring that there are no outstanding claims or legal complications.
7. Review of Conditions: The lender assesses any conditions or contingencies outlined during the underwriting process. The lender ensures that all conditions are met before proceeding with the clear to close.
8. Final Loan Review: The lender conducts a final review of the entire loan package. They confirm that the loan aligns with their specific loan program requirements.
9. Preparation of Closing Documents: Once the lender is satisfied that all requirements have been met, they prepare the final closing documents. Final closing documents may include:
   • Closing Disclosure (CD).
   • Promissory Note.
   • Deed of Trust.
   • Truth in Lending Act (TILA) Disclosure.
   • Loan Estimate.
   • IRS Form 4506-T.
   • State and Local Government Forms (varies by jurisdiction)

How Long Does it Take to Clear to Close?

It depends. It depends on many things like:

1. How complex your purchase is.
2. How responsive all parties are.
3. How long it takes for you to take the first step. The first step of submitting a mortgage application.
4. How long it takes for the lender’s underwriter to review your application.
5. How quickly you find a house and put in an offer.
6. How soon the seller send you a purchase agreement.
7. How soon you reach the under contract stage.
8. How long you take to provide the earnest money.
9. How long it takes to get the house appraised and inspected.
10. How long title search takes.
11. How quickly issues, contingencies, conditions are resolved.

Getting to clear to close could take four weeks. Eight weeks. Five months. Even years. Some things will be in your court. Other things won’t. Focus on what you can control. And try your best to get those things done in a timely manner.

What Happens After You’re Clear to Close?

Received the clear to close? Great! There are just a few steps remaining before the loan closing is fully completed. These steps include:

1. Scheduling the closing date (buyer).
2. Preparing the closing documents (seller).
3. Attending the closing (buyer)—in person or remotely.
4. Signing the closing documents (all applicable parties).
5. Reviewing and signing the final closing documents by all applicable parties.
6. Disbursing funds (closing agent or escrow company).
7. Transferring the ownership of the property.

Can I Be Denied a Loan After Clear to Close?

Yes. It is however a rare occurrence! While clear to close is a crucial step, it is not the final stage. The closing itself is the final stage. The closing is where the mortgage loan is officially funded. There are a few reasons why a lender might revoke your clear to close.

If there has been a change in your financial circumstance. This can include anything like:

1. You losing your job?
2. Title issues discovered late in the process.
3. Substantial damage to the property after receiving the clear to close.
4. Failure to comply with the lender’s conditions.
5. Misrepresentation of your finances.
6. A higher DTI due to making major purchases.

Clear to close is not the same thing as closing. Closing needs to happen before you can receive ownership of the house from the seller.

Conclusion

Clear to close symbolizes the culmination of your efforts. The convergence of meticulous evaluation and diligent preparation. It brings assurance, relief, and a renewed sense of anticipation as you inch closer to the keys of your dream home.

Received the clear to close?

Congratulations on reaching this extraordinary moment! Armed with the knowledge gained, you can confidently navigate the remaining steps toward the closing day.

Review the closing documents with care. Coordinate with your closing agent. And prepare yourself for the final stride that will officially make you a homeowner. Be sure to check out our essential post closing checklist.

Finally, as you step into your new home, cherish the memories you’ll create within its walls. It is a testament to your determination. It is a testament to your resilience. It is your testament to your unwavering belief in the possibility of homeownership.

May your future be filled with joy. With comfort. With the fulfillment that comes with owning a place you can truly call your own. Go forth and embrace the joy of homeownership.

Waiting for the clear to close?

Remember, the road to clear to close is not without its challenges. It requires collaboration. It requires attention to detail. It requires perseverance. By understanding the requirements of clear to close, you have set yourself up for success.

Know that I am here to support you. I understand that this can be an emotional and exciting time. I am here to listen. I am here to offer you advice. I am here to be a source of encouragement. Send me all your questions.

Keep your spirits high. Stay focused. And trust in the process. Your dream of homeownership is within reach. I have every confidence that you will soon be celebrating your own clear to close moment. Hang in there. Stay positive. And be rest assured that I’m cheering you on every step of the way!

Sincerely,

Your Mortgage Minister.

FAQs About Clear to Close

When are funds verified for closing?

Funds are typically verified for closing shortly before the closing date.

How long to close after receiving the title commitment?

The time to close after receiving the title commitment can vary, but it is usually within a few weeks.

Closing disclosure but no clear to close?

Having a closing disclosure without clear to close means there may still be outstanding conditions or contingencies that need to be resolved before final approval.

How long to close after conditional approval?

The time to close after conditional approval depends on various factors, but it can range from a few days to a few weeks.

How long does clear to close take?

The duration of the clear to close process can vary, but it generally takes a few days to a couple of weeks.

What is the clear to close 3 day rule?

The clear to close 3-day rule refers to the requirement that the Closing Disclosure must be provided to the borrower at least three business days before the closing date.

Does closing disclosure mean clear to close?

While the closing disclosure is an important document, it does not necessarily mean that you have received clear to close. Clear to close is a separate approval indicating final loan approval and readiness for closing.

How long before closing do you get clear to close?

The timing of receiving clear to close can vary, but it often happens a few days before the scheduled closing date.

Do lenders pull credit after clear to close?

Lenders generally do not pull credit again after clear to close, but it’s important to maintain financial stability and avoid any changes that could impact your credit profile until the loan is funded.