Clear to close: What to expect and what happens next
You’re close to the finish line of the home buying process—your mortgage lender has just notified you that your loan application has been approved. You’re now at the “clear to close” stage. But what does that entail, and what are the next steps before you get the keys to your new home?
Although each lender has its own requirements, most mortgage applicants will follow a similar process.
What does “clear to close” mean?
When your mortgage lender notifies you that you’re “clear to close,” it means a mortgage underwriter has reviewed your home loan application and verified that you’ve met the necessary requirements to obtain a loan. This process includes reviewing all your financials and ensuring the property meets specific inspection standards.ec-newsweek-clear-to-close
How soon before closing is clear to close?
The time between “clear to close” and your closing date can vary based on several factors, such as scheduling logistics, individual state laws, completing any remaining paperwork and individual lender processes. Home buyers can typically expect the process to be completed within three days to about a week.ec-newsweek-clear-to-close
What is the difference between final approval and clear to close?
“Final approval” from the underwriter means your loan application has been approved, but you may still need to meet certain criteria before closing. Meanwhile, “clear to close” is the step taken after final approval. This status indicates you’ve met these conditions and can finalize the purchase of your new home.ec-busnssinsidr-undrwritng
How to ensure you’re clear to close on your mortgage
Conduct a title search
Typically, your lender will run a title search to ensure there are no liens on the property or any other issues that could prevent you from closing on the home. It may be wise to get title insurance to protect yourself against any future ownership challenges.
Schedule a home inspection and appraisal
Depending on your loan type, you’ll likely want to arrange a home inspection to identify any potential problems with the property.ec-newsweek-clear-to-close VA loans don’t usually require home inspections, but they can be triggered under specific circumstances, like if the appraisal report notes damage from wood-destroying insects.ec-va-loan-jul-24 Inspections can also reveal important information about the home’s condition you’ll want to know for maintenance and repairs down the road.
Additionally, your lender will probably schedule a home appraisal to determine the property’s market value as part of the underwriting review process. If the appraisal value is lower than the home’s purchase price, you can potentially negotiate with the seller to lower the price. However, if you notice errors in the report or the seller doesn’t want to lower the price, you can seek another appraisal. Otherwise, the lender may adjust the loan amount based on the appraisal.ec-freddiemac-apprsl
Complete required paperwork
Mortgage lenders will need you to provide documentation verifying your income, credit and debt-to-income (DTI) ratio to assess if your finances are in order.ec-busnssinsidr-undrwritng
Here’s a general list of documents you can start gathering to submit:ec-consumer-fin-appl-pkec-consumer-fin-appl-pkec-consumer-fin-appl-pk
- Pay stub for the last 30 days
- W-2 forms for the last two years
- Signed federal tax returns for the last two years
- Documentation of other sources of income, if applicable
- Two most recent bank statements
- Documentation of your down payment source (investment or savings account statements showing at least two months’ history of ownership—if some of the money was a gift, you’ll need a signed gift letter to show the lender)
- Documentation of name change, if recent
- Proof of identity (usually a driver's license or non-driver ID)
- Your Social Security number
- Certificate of housing counseling or home buyer education, if applicable
Keep in mind this is a general list to help you prepare. The exact documents required will depend on the lender and your unique financial circumstances.
Get homeowner’s insurance
Most lenders require home buyers to purchase homeowners insurance before closing on the loan. It’s best to secure insurance within a few business days of signing the purchase agreement.ec-newsweek-clear-to-close
Arrange a final walkthrough
Schedule a final walkthrough to confirm the property’s condition hasn’t changed since your last visit, everything is in working order, any scheduled repairs have been completed and the seller’s belongings have been removed. Ideally, this step should take place 24 hours before closing.ec-newsweek-clear-to-close
What to expect after you close on your mortgage
Once you’re ready to close on your loan, you can expect the following actions to take place.
Review your initial closing disclosure
After you’re cleared to close, your loan officer will prepare an initial closing disclosure. The closing disclosure document provides a comprehensive overview of your mortgage loan terms, closing costs and the payment amount for the closing date.
This clear to close three-day rule is set by the CFPB so home buyers have ample time to review the document.ec-consumer-cls-disclosureec-consumer-cls-disclosureec-consumer-cls-disclosureec-consumer-cls-disclosure It’s important to carefully comb through the closing disclosure to ensure it’s free of errors or discrepancies in payments and closing costs. Compare the figure listed to your original loan estimate.ec-newsweek-clear-to-close
Sign loan documents and pay closing fees
On your closing day, you’ll sign documents like the mortgage note and deed, along with other affidavits and declarations. Your lender will send them to your title company.ec-newsweek-clear-to-close You’ll also transfer the required funds to the lender, either electronically or via a cashier’s check, depending on the disclosure terms.
After the closing process is complete, your closing agent will file the signed deed and mortgage with the county recorder to officially record the transfer of ownership. Once these steps are complete, you’re officially done with the closing process. It’s time to get the keys to your new home.
Can a lender deny your loan after closing?
Yes, your lender can deny your loan after you’re clear to close.ec-newsweek-clear-to-close Lenders may deny your mortgage loan if you make a large purchase or experience financial struggles that are deemed different from the information provided at the time of the mortgage application.
These circumstances can include but aren’t limited to:ec-newsweek-clear-to-close,ec-forbes-clear-to-closeec-forbes-clear-to-close
- Losing your job or switching jobs
- Incurring significant debt during the mortgage application process
- Depositing or withdrawing substantial sums of money from bank accounts
- Paying off a large amount of debt
- Getting married or divorced
- Applying for new credit cards or loans
In summary
Achieving “clear to close” status marks a significant milestone in the mortgage process, signaling that your lender approved your loan application and you can now schedule a closing date. Buying a home is a complex process, so preparing in advance can help simplify each stage leading to your end goal. If you’re searching for a new home, start the preapproval process to see what option fits your needs.