It can take some buyers months to find the perfect property. And once they do, the mortgage application process can seem endless—especially when you’re anxious to get the keys to your new home.
Before that can happen, you’ll need to hear from your lender that everything has been approved and that everything is good to go.
Then, with just a few simple steps remaining, you will finally be able to exhale. In other words, you will have the loan you need to buy the home you want.
So, what exactly is clear to close in terms of your mortgage? Here is everything you need to know.
What Does it Mean When You Get the Clear to Close?
Getting a “clear to close” means that your loan has passed all the requirements and has met all the conditions set forth by the lender – allowing the file to move forward to the closing.
Your lender carefully reviews all the documents you have provided and verified that the mortgage you have chosen, as well as the amount, are all a good fit for you. They are, after all, taking a huge risk in loaning you the money and want to do their due diligence to make sure they are making a wise decision in doing so.
Once your file has been dubbed “clear to close”, the lender will then move into the next phase of prepping for your closing. This is when you will sign all your loan documents, as well as the documents provided by your title company so that they can officially transfer the title to you.
How to Achieve Clear to Close Status on Your Mortgage
When applying for a home loan, the goal is to get approved and cleared to close on the property. While a lot of the work rests on the shoulders of the loan officer and underwriter, there are things that you can do, too, to make this a much smoother process.
The more thorough and swift you are at providing the following information, the greater chance you have of your mortgage application getting approved.
Provide All Documentation
Your lender will require quite a bit of documentation along with your application. This is because they are trying to determine whether you have the money to pay back the loan. Documents often required include pay stubs and bank statements in order to prove your income and your assets.
A list of your monthly expenses and debt is also needed. Most lenders will look at your debt-to-income ratio to determine whether you are a good fit for your loan. And granting permission to pull your credit report is also necessary.
Don’t overlook anything when providing your documentation or you could be denied.
An Accepted Offer
When you find the home of your dreams, you need to make an offer on it – and get the seller to accept it. Your lender will need to know exactly how much you need for the purchase, as well as whether it makes sense.
Before you make your offer, consider the market, how long the property has been listed, any work that needs to be done to it, and how many other interested parties there are. If you are not sure how to strategize and come up with the right offer, your realtor will be able to help.
The Appraisal and Inspection
The home will need to be appraised and inspected before you will be approved for a mortgage—and both should be handled by third parties.
The appraisal determines the fair market value of the property while the inspection will uncover any problem areas or issues with the property’s interior and exterior.
The results of these are used by the lender to determine what the property is worth and if the amount of your accepted offer makes sense.
Many borrowers fear underwriters. After all, without the underwriter’s approval, you likely will not get approved for the loan.
These are the individuals who go over everything with a fine-toothed comb. They look at all your documents, your debt-to-income ratio, your credit history, your current income, your assets, the details of the loan you are seeking, and so forth.
They let the lender know if you are a good fit.
How Long Does it Take to Get Clear to Close Status?
There are many steps – and many people – involved in gaining loan approval from your lender. Each of the above steps must be completed. While you may turn over all your documents right away, you may still have to wait on the appraiser and inspector based on their schedules, as well as the review of the underwriter.
On average, you can expect the entire process, from your initial application to being cleared to close to take about 30 to 45 days. Then it should only be a couple more days until you have the closing and get the keys – if things flow smoothly. Stay in contact with your lender so that you can address anything that comes up without delay.
Your Mortgage is Now Clear to Close: What’s Next?
Once you are cleared to close, you are almost there. When you have reached this stage, you can feel quite confident that you are going to be purchasing your new home. However, there are still a couple of things that need to be handled.
A Closing Disclosure outlines the terms and conditions of your new mortgage agreement and explains what you are going to be responsible for. You must review this carefully, make sure you fully understand it, and then sign it before you can close.
Lastly, a final walkthrough will take place to make sure that the home is still in proper condition. A lot can happen in 30 days, so this is always a good way to protect yourself.
Get through all of this and then you can celebrate your closing day.