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What happens when I’m “clear to close”?

Erik J. MartinThe Mortgage Reports Contributor

In this article:

Being clear to close (CTC) means that you have satisfied all conditions for your mortgage lender. They include:

  • Underwriting conditions for the borrower, such as updated bank statements
  • Funding conditions, including the payment of closing costs and the down payment
  • Quality control for the lender, including a final credit check and employment verification

Once you are cleared to close, the lender prepares your documents. Next, you review and sign them, and the lender wires funds to your title company (or attorney in some states).

Verify your new rate (Sep 19th, 2018)

The importance of being clear to close

A “clear to close” buyer is in a good position. That’s because the mortgage underwriter has reviewed and approved all documentation required to fund the loan. The lender can then send a clear to close letter. Also, it means you can set the closing date. All that remains is the actual closing process.

Related: How to chose the right closing date

Getting to this point takes some hard work. First, you must provide a lot of paperwork. You have to meet the minimum criteria. Also, your finances should satisfy the lender. Even then, the task isn’t finished.

Learn how you got to this point. Furthermore, find out what else you need to do before you can close. Ask questions about the process. And prepare to respond quickly to final requests. If things go smoothly, you’ll be in your newly bought home in no time.

Underwriting requirements

Being clear to close requires you to meet underwriting, funding, and quality control conditions.

“Underwriting conditions are found in the commitment letter the lender sent you. They’re the things you need to do in order to get a clear to close letter,” says James Dodge, professor of law at Purdue University Global. Things the lender may need from you include:

  • a copy of the signed purchase contract
  • updated bank statements, pay stubs and tax returns
  • info about large deposits (to ensure you aren’t taking on additional debt)
  • letter or answers about anything unusual related to your finances
  • gift letter (if some or all of the down payment includes a gift from a relative or friend).

Funding requirements

“Funding conditions are extra requirements. Failing to provide these can prevent you from being clear to close,” adds Dodge. These may include:

  • paying closing costs
  • depositing the down payment into escrow
  • having clear title
  • paying outstanding debt obligations
  • properly executing loan documents

Other requirements

Aside from standard funding conditions, other requirements may be added after an underwriter reviews your loan and application.

Related: 5 nosy questions to expect from your mortgage lender

“This is done for quality control purposes,” Dodge notes. “These conditions can vary. That’s because they’re based on matters that give the underwriter cause for concern.” These conditions can include:

  • Conducting a final credit check
  • Explaining recent credit inquiries or issues on your credit report
  • Verifying that you have homeowners insurance (and possibly flood insurance) coverage
  • Verifying employment status

How to ease the process

There are things you can do to help your cause and speed up the clear to close process. Try these tips:

Respond punctually to your lender

“Provide the documents they request in a timely manner. They may ask for the same documents multiple times. And some requests may seem irrelevant. Just keep your cool. Give them what they ask for,” says Bruce Ailion, Realtor and real estate attorney.

Give only what they ask for

“Only provide your lender the documents they request. Do not over disclose any information,” says Theresa Williams-Barrett with Affinity Federal Credit Union.

Maintain the status quo

“Do not change jobs or quit your job,” cautions Ailion. “In addition, don’t file for divorce or bankruptcy. Try not to get sued. And taking out any other new loans or co-signing a loan for a relative.”

Furnish proof of employment

“Do you still have the same job you had when you applied for your mortgage? If so, get an updated proof of employment document,” suggests Dodge. “If you’ve changed jobs, get a new proof of employment.”

Don’t mess with your credit

“Don’t make any new purchases, if possible, between the time you apply for your loan and closing. If you must make a major purchase, talk to your lender first,” Dodge says. “If it’s something small, like a new cell phone, provide the lender with a letter of explanation.”

Get your insurance up to snuff

“Review the scope of your homeowners and flood insurance coverage with your insurance agent. Furthermore, provide your agent with a copy of your purchase contract,” adds Dodge. “This way, they can determine whether your coverage is sufficient to protect the home you’re buying.”

Talk to your closing officer

“Communicate with your settlement agent, title company or attorney. Ask if they need anything further from you,” says Jerry Baez, mortgage loan consultant with Orange County’s Credit Union.

When in doubt, ask the lender

“Do you have any unusual circumstances, such as money gifted from a loved one? If so, reach out to your lender in advance. Find out what info they require,” Dodge says.

What happens next

Once you are clear to close, you’ve entered the final stretch.

“On average, you can expect a 24- to 72-hour turnaround to be cleared to close,” Baez says.

Once cleared, your lender will wire funds to your closing officer. This person will confirm receipt and ensure the loan gets recorded with the county.

“This is an important point in your journey,” adds Baez. “It serves as final approval. And it grants you the ability to schedule a closing.”

Verify your new rate (Sep 19th, 2018)