Clear To Close: What To Expect And What Happens Next

Hearing the words “clear to close” can bring relief to many home buyers nearing the end of the mortgage process. With underwriting, document verification and the offer out of the way, being clear to close – sometimes referred to as “CTC” – in real estate is a great sign that your lender will grant you the home loan you need.

All that said, being clear to close doesn’t mean you’ve reached the finish line. You’ll need to complete a few final steps before you get the keys to the property.

What Does ‘Clear To Close’ Mean?

“Clear to close” simply means that you’ve met the requirements and conditions to close on your mortgage. At this stage, your lender has fully inspected your documents and verified that you meet the expectations of the type and amount of mortgage you’re requesting.

Once a borrower is clear to close a mortgage, lenders will typically start preparing for the closing day. Your loan officer will schedule a date and time for your closing meeting and contact your title company, real estate attorney or other parties who plan on attending. Your lender will also assemble any final documents that you’ll need to sign on your closing date.

How To Get Your Loan Cleared To Close

Reaching clear to close requires a considerable amount of work for both the lender and the borrower. Missing even one step could be the difference between a fully cleared mortgage loan and a denied application.

To get your mortgage cleared for its closing day, you’ll have to complete the following steps beforehand:

1. Provide Documentation

Your mortgage provider will need to check a number of documents before they fully approve your application. You might also need to provide your lender with written permission to access your credit score.

Your lender may typically request:

• Current bank statements, tax returns, paycheck stubs and other verifications of your income and assets
• A copy of the signed purchase agreement
• Proof that you haven’t taken on additional debt (for example, providing details or information about large deposits to your accounts)
• Documented explanation of any unusual financial circumstances
• A gift letter documenting funds gifted from friends or family

2. Make An Offer On A Home

You can’t get clear to close until a seller accepts your offer on their home. Many variables affect the final amount you put on the table, so consider how long the house has been on the market, the number of repairs you’ll need to make and the number of other buyers who also have their eye on the home.

3. Have The Home Appraised And Inspected

During your appraisal, a third-party licensed appraiser will determine the property’s fair market value, which assures both you and your lender that the amount you’ll pay for the home aligns with its actual worth. Home inspections, on the other hand, help buyers identify issues with a home before they purchase it.

4. Get Approved By Underwriting

The underwriting process helps lenders approve your loan. Underwriters will not only look at the documents you’ve submitted, they’ll also further inspect the details surrounding your income, credit history, debt-to-income ratio (DTI), assets, and the amount and type of loan you’ve requested.

Working through each step is part of the reason why it can take 30 – 45 days on average to move from underwriting to closing. If you want to reach CTC status as quickly as possible, make sure you prepare your documents in advance, fill out your mortgage application to completion, satisfy all of your underwriting requirements and keep an open line of communication with your lender.

What Happens After You’re Clear To Close On Your Mortgage?

Once your lender has notified you that you’re clear to close, a good majority of the mortgage process will be behind you. However, a few important stages still stand between you and homeownership.

You should be completely clear to close once you:

Receive Your Closing Disclosure

After you’ve cleared underwriting and conditional approvals, your loan officer will send you a Closing Disclosure. This five-page document outlines the terms and conditions of your mortgage agreement, providing a comprehensive overview of all of the costs and fees you’ll pay when you provide your signature. By law you should receive this disclosure at least 3 business days before you sign your final mortgage paperwork.

Because you’re on the hook for any and all expenses mentioned, understanding your Closing Disclosure is one of the most important steps of the home buying process. You should compare it to your initial loan estimate to ensure you’re getting the deal you and the seller agreed upon.

Complete A Final Walk-Through

A final walk-through is your chance to ensure the property is in the condition you and the seller have agreed upon. Walk-throughs aren’t technically a required step after you’re clear to close, but skipping out on a final inspection could be a costly mistake.

In most cases, the home should be ready to go by the time you conduct the last walk-through. But if anything is wrong with the house, this is your last chance to catch these problems before they become your responsibility.

Attend Closing Day

Your closing date is when the home title officially transfers and you become the new legal owner of the property. Clear to close means you’re ready for the closing process, while closing refers to the act of closing on your mortgage loan. You’ll sign all the remaining paperwork, have the deed updated, make your down payment and pay closing costs.

After all of that, you’re officially the owner of a new home.

Can A Lender Still Deny Your Loan After The Closing Disclosure?

Clear-to-close buyers aren’t usually denied after their loan is approved and they’ve signed the Closing Disclosure. But there are circumstances when a lender may decline an applicant at this stage.

These rejections are usually caused by drastic changes to your financial situation. Leaving your job, applying for a new large credit line or taking out another loan can all be red flags for your mortgage lender. If it’s possible, you should avoid making any drastic financial changes until the house is yours.

How Long Does It Take To Close After You’ve Been Cleared?

Most buyers won’t have to wait very long to meet at the closing table once they’re clear to close. You should expect the process to follow the clear-to-close 3-day rule, where you receive your Closing Disclosure 3 business days before your closing date.

You should also be aware that your closing timeline may take longer if you encounter any roadblocks between the time you’re clear to close and the closing itself. For example, if you notice significant issues with the home during your final walk-through, you might need to postpone your closing meeting to give the seller enough time to make these repairs.

The Bottom Line

Being clear to close means you’re nearly ready to close on your home buying journey. Having an understanding of how the clear-to-close process works can help you and your lender reach the end that much quicker. As long as you have all of your documents in order and no issues with the home itself come up, becoming clear to close should put you just days away from owning your new home.

If you’re still in the beginning phase of your home buying journey, consider starting the mortgage process today with Rocket Mortgage^®.