Clear to Close
Purchasing a home can sometimes be a long process involving a lot of paperwork and going over fine details, but when you hear the words “clear to close,” you know you’re in the home stretch. But what is a clear to close? A clear to close, sometimes referred to as a CTC, is the underwriter’s official statement saying that you have passed all underwriter requirements. This is cause for celebration since it means your credit score, debt-to-income ratio, eligibility, employment history, and so many other details checked out. The loan is then ready to close, and once it does, it’s time to move in! However, issuing a clear to close does not necessarily mean that your loan will close. Let’s take a closer look at what happens after underwriter approved loan.
Between Clear to Close and the Actual Closing
My mortgage has been approved what happens next? The closing date indicated on your original document may not be the actual date you close on your loan. If the underwriting stage goes quickly, you may be able to close on your loan sooner than the original date. On the flip side, if there are a few roadblocks in underwriting, you may close on your loan later than the original date.
Either way, after you’ve received the Clear to Close (CTC), it’s important to know that you will not immediately close on the loan. A few things need to happen in that in-between time first. At this point, a person called a closer will review all the final documents and coordinate information between the loan officer, underwriter, and title company. The closer must verify and clear all prior-to-funding conditions before the mortgage company will wire transfer funds to the closing agent for the official closing. Another thing your lender will work on during this time is the closing disclosure.
- Soft credit check about 5 days before closing
- Verbal verification of employment
- Adequate funds available for closing
- Title and judgment searches
- Insurance coverage
Approving the Closing Disclosure
The closing disclosure (typically called a “CD” by your lender) is a document that states all of the closing costs for the buyer as well as the seller, and it is a huge part of the clear to close process. Once the CD is approved, the closing costs are finalized and a specific closing date is set. Before the CD is approved, however, the costs communicated to you are only estimates of what you will pay.
In order for the CD to be completed and approved, a closing attorney must also be used in many cases. Some states that require this include the following:
- South Carolina
- North Carolina
- New York
Even if you’re state isn’t on this list, an attorney may still be required.
Alive and Well Statement
Some active-duty service members will apply for a loan while they’re deployed. Even though they are personally unavailable, they can allow a spouse or other relative to apply for the loan for them through using the power of attorney. By taking this route, the person applying for the loan in place of the veteran will need to provide the underwriter with an alive and well statement. This assures the lender that the service member is indeed alive and well. This can be done by the service member either drafting up a statement or calling their loan officer on the day of closing to confirm.
In many cases, the current homeowner will be asked to make some repairs and other changes to the house after the first inspection. In order to ensure that these changes have indeed been made, the appraiser will need to re-inspect the house. Documentation of who paid for the repairs will need to be provided at this point. But if the necessary repairs have not been made, then the loan process will likely be put on hold until they have been completed. As this can push your closing date back even further, it’s a good idea to remind the current homeowner (or whoever is making the repairs) of the needed repairs as well as the due date.
Avoid This Before Funding
Just because you are clear to close that does not mean you can now make large purchases on credit. Putting anything on credit will adjust your credit score, debt-to-income ratio, and many other financial details, meaning everything will need to be checked yet again. Using credit at this point will essentially send you back to underwriting, and if the new numbers don’t meet the requirements, your loan can be denied. Instead, you should wait until after your loan has funded to make big purchases or take out any more credit.
Another thing to avoid is changing employment. A change in employment will also alter your financial information. With a change in employment, your lender could determine that you can no longer afford the loan and you can, once again, be denied. The last thing you want to do is destroy the loan just days before you move into the house.
Crossing the Finish Line
If you’ve dotted your i’s and crossed your t’s, the only thing that is left in the home buying process is to close and move in. Some real estate agents will have you walk through the house and property once more as a final check, but that is outside of the lender’s responsibilities. Closing mostly involves a lot of signing and transferring funds. After that, the keys are yours!
At Low VA Rates, we want to ensure the entire loan process goes as smoothly and quickly as possible, especially closing. We have a highly qualified team ready to aid in whatever way they can. Give us a call at 855-223-0705 to get started or click here to apply online now.