Clear to close meaning: What to expect and what happens next

Hearing the term “clear to close” marks a major milestone in any home buying journey. It’s a signal from your lender that they’re ready to give you the green light to close on your mortgage and finalize your home purchase. While being clear to close means you’re approaching the finish line, there are still a few final steps before you get the keys to your new home.

What does 'clear to close' mean?

"Clear to close" (CTC) means you've met the requirements and conditions to close on your mortgage to buy a home. At this stage in the process, your lender has fully reviewed your documents, approved your application, and signaled that you can schedule your closing day.

Your loan officer will schedule a date and time for your closing meeting with the title company. Your lender will also prepare any final documents you'll need to sign on your closing date.

Typical conditions to clear

Here are some of the common conditions you’ll need to meet for a lender to issue the clear to close:

• Final verification of employment
• Income and asset verification
• Proof of homeowners insurance
• Appraisal results match purchase price
• Title search shows no liens or claims against the property
• Flood certification

How to get your loan cleared to close

To get your mortgage cleared for its closing day, you'll have to complete the following steps ahead of time.

1.  Apply for your loan

The first step toward getting a mortgage is getting preapproval from a lender. It’s not a final loan offer, but it tells you roughly how much they’ll be willing to lend you. Once you’ve found the home you want to buy, you can start the process of getting final approval on your mortgage. You can't get clear to close on a loan application until a seller accepts your offer.

2.  Submit documents

Before your lender can approval your application, they’ll need to see proof that you can afford to repay the loan. You’ll need to supply a variety of financial documents that indicate you’ll likely be able to keep up with your mortgage payments.

Lenders typically ask for:

• Current checking and savings account bank statements
• Recent tax returns
• Pay stubs from the last 2 years (W-2s, 1099s)
• Statements for investment accounts (401(k)s, IRAs, CDs)
• Any income from alimony or child support
• Documentation of any rental income
• Other proof of verification of your income and assets
• A copy of the signed purchase agreement
• Proof that you haven't taken on additional debt
• Documented explanation of any unusual financial circumstances
• A gift letter documenting funds gifted from friends or family

3. Meet contingencies

You can't get clear to close on a home until a seller accepts your offer and all the contingencies listed in the purchase agreement have been met. Contingencies are conditions required in order for the deal to go through.

One common contingency buyers include is an appraisal contingency. Your lender will order an appraisal of the home to determine its fair market value. Lenders need to confirm that the loan amount matches the value of the home because they won’t lend you more than it’s worth.

If you include an appraisal contingency in the deal, it allows you to walk away without penalty if the appraisal comes in lower than expected. Otherwise, you’d have to pay the difference between the appraised value and purchase price out of your own pocket.

4. Your lender will underwrite your application

During the underwriting process, lenders will review your finances and the results of the appraisal to determine whether or not you’ll be approved for your loan. Underwriters will look at the documents and consider:

• Details about your income
• Credit history
• Debt-to-income ratio (DTI)
• Assets
• The amount and type of loan you've requested

Your lender needs thoroughly review your finances to make sure you can afford to repay the loan, as a result, the underwriting process can take anywhere from 45 - 60 days.

If you want to reach CTC status as quickly as possible, prepare your documents in advance, complete your mortgage application, satisfy all of your underwriting requirements, and keep an open line of communication with your lender.

5. Receive a mortgage commitment letter

Before you receive a clear to close, you'll get a firm mortgage commitment letter. At this point, you've have already gotten preapproval from a lender, found the home you want to buy, and made an offer. You’ll also have completed a mortgage application, provided the lender with supporting documents, and met all contingencies.

A mortgage commitment letter can fall under two camps: a conditional commitment letter or a firm commitment letter. With a conditional commitment letter, you'll still need to check out certain requirements. Your lender gives you a firm commitment letter later when they're set on giving you approval on your home loan amount. This is after the underwriting process has been completed

A firm mortgage commitment letter is a more formal letter in which the lender promises to loan you the money and has the money in tow for your home purchase. The conditions of the letter hinge on your current financial situation. For the lender to seal the deal, you might need to pay a commitment fee, which might be a flat fee or anywhere between 0.25% and 1.0% of the loan amount.

What happens after you're cleared to close on your mortgage?

Once your lender has let you know you're clear to close, here’s what happens next.

Receive your Closing Disclosure

After you've cleared underwriting and conditional approvals, your lender will send you a Closing Disclosure. This document outlines the key details of your mortgage terms – including your interest rate, monthly payment, and closing costs.

Your lender is required by to law to send you your Closing Disclosure at least 3 business days before your closing. This gives you the opportunity to thoroughly review your mortgage terms before you sign anything. Be sure to compare the figures listed on the Closing Disclosure and compare them with those listed on the Loan Estimate.

Complete a final walk-through

A final walk-through is your chance to make sure the property is in the condition you and the seller have agreed upon. If the seller has agreed to cover certain repairs, this is the time to make sure they’ve been completed. Although walk-throughs aren't technically a required step in the mortgage process, 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 your final 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

On your closing day, you’ll sign all the necessary paperwork, make your down payment, and pay your closing costs. The home title will be officially transferred to your name, and you become the new legal owner of the property.

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. However, there are some instances when a lender may deny your loan if there have been drastic changes in your financial situation, such as: 

• Leaving your job
• Making a large bank account withdrawal
• Applying for a new large credit line
• Taking out another loan

These situations are often considered red flags for lenders because they could jeopardize your ability to afford your mortgage payments.

Cleared to close FAQ

Here are the answers to some frequently asked questions about being cleared to close.

How long does it take to close after you’ve been cleared?

It will take at least 3 business days from the time you get your Closing Disclosure until the actual closing meeting. Clear to close means the lender is ready to close the sale, but there still may be other conditions that need to be met for the deal to be finalized.

Should you encounter any roadblocks, your closing timeline might take longer. For example, if the seller has not completed any agreed upon repairs by the final walk-though, you may need to postpone your closing meeting.

Do lenders check your credit score after being cleared to close?

Lenders often perform a final credit check after you’ve been cleared to closer 1 - 3 days before closing. This is to ensure there haven’t been major changes to your financial situation. It’s also why it’s a good idea to avoid applying for new credit because closing on a loan.

Can a buyer back out after being cleared to close?

A buyer can technically back out of the deal any time before closing, but there can be consequences. If you try to cancel the deal after you’ve signed the purchase agreement for a reason that’s not listed as a contingency, you’ll lose your earnest money deposit.

What’s the difference between clear to close and final approval?

Clear to close means your application has cleared the underwriting process, but it’s not the same as final approval. There may still be some conditions that need to be met in order to get final approval. If there are any issues with the results of the appraisal or final walk-through, that could delay final approval.

The bottom line: Clear to close is the last major hurdle to buying a house

Clear to close is a term that lenders use to convey that you’ve met the requirements for your loan and are ready to schedule closing. It’s an indication that you’re ready to schedule your loan closing, but there may still be some conditions that need to be met to get final approval. As long as there haven’t been any major changes in your financial situation or issues with the home, being clear to close means you’re in the final stretch of your home buying journey.

Are you ready to become a homeowner? Consider starting the mortgage process today with Rocket Mortgage®.